Considering A Reverse Mortgage?
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Your plan, your reverse mortgage

 

You’ve worked hard your whole life to build your nest egg so it’s worth taking a look at every available option to ensure your retirement assets are used in the most profitable and efficient way. A reverse mortgage loan with us can provide additional funds in retirement. It can also prevent the depletion of your other assets, allowing them to perform better. While we are not a financial planner and do not offer financial planning services, we encourage you to consult with your advisor to see if a reverse mortgage might be right for you. You may be surprised to hear that today’s reverse mortgage has a variety of options, may have lower costs and has additional consumer protections in place to provide you and your family with more confidence for your retirement security. Find out how today’s HECM Reverse Mortgage loan offers a line of credit that you can tap into when you need it - and how your unused line of credit actually grows every month! You can even convert it, at any time, to annuity-style monthly payments for a period of time OR for the rest of your life*. Or build-in additional security as a rainy day account. A reverse mortgage is now a versatile, safe and effective retirement planning tool to meet a variety of needs.

What is a reverse mortgage?

A reverse mortgage is a way for borrowers age 62 or older to unlock the equity in their home by turning it into tax-free cash without having to make any monthly mortgage payments. While loan proceeds are not taxable income, property taxes must be paid. Please consult a tax advisor.

 

What are the qualifications?

Qualifications include:

 

  • The borrower on title must be 62 years or older (a nonborrowing spouse may be under age 62)

 

  • The home must be the borrower’s primary residence

 

  • The borrower must own the home and meet the financial requirements of the HECM program

 

What are the borrower’s obligations?
Borrowers must continue paying property taxes and homeowners insurance, maintain the home, live in the home, and otherwise comply with the loan terms.

 

“A reverse mortgage credit line offers great flexibility. It can be used anytime, for any purpose, and it grows.”

 

Jack Guttentag, Professor of Finance Emeritus, formerly Jacob Safra Professor of International Banking, Wharton School and Chief of the Domestic Research Division, Federal Reserve Bank of New York

One question friends ask is would I do it myself and the answer is not only would I, I have. And I’m very very pleased with the result. It has really made my life in retirement a great pleasure. It enabled me to not worry.”

Barry Sacks, Real Estate Tax Attorney and Theoretical Physics Ph.D., MIT

Ways to use a reverse mortgage for retirement planning

There are three main ways a reverse mortgage loan can be used to help provide additional retirement security.

 

1. Delay Social Security benefits and let investments grow

Using this approach, a reverse mortgage loan is established at the outset of retirement and drawn upon every year to provide retirement income until exhausted, allowing the retiree’s investment portfolio, such as a 401(k) plan, more time to grow. Subsequent withdrawals are then made from the portfolio. This strategy also enables the retiree to delay accessing Social Security benefits, thereby increasing their monthly payments later in life.

For example, Esther is a 62-year old homeowner who wants to let her investment portfolio grow and delay using her Social Security benefits. She gets a reverse mortgage on her $350,000 home and qualifies for an estimated loan of $183,4001. She then elects to receive monthly payments of about $1,000 until she turns 70 years old. As referenced on the chart2, if Esther decided to receive her Social Security benefits at age 62, she would have received an estimated lifetime monthly benefit of $1,016. By using a reverse mortgage to help delay her Social Security until age 70, she is now eligible to receive a monthly benefit of $1,789, almost double what she would have received at age 62.

       Social Security Benefits Estimator

Age of
Retirement

Estimate Monthly Benefit

62

$1,016.00

65

$1,256.00

68

$1,572.00

70

$1,789.00

 

 

 

2. Protection from investment downturns


Using this second approach, a reverse mortgage loan can be established at the beginning of retirement to help minimize investment portfolio risk. A reverse mortgage loan can supplement monthly income during portfolio downturns due to market corrections or recessions. Drawing on your investments during “trough periods” may lead to a higher chance of exhausting them during retirement. A reverse mortgage loan may allow you to preserve your investment portfolio longer during retirement

3. Grow retirement funds with the HECM Growing Line of Credit

 

A line of credit can be established using a HECM Reverse Mortgage Loan and is left to grow at an interest rate that is equal to the current loan rates. This line of credit also includes a compounding feature so that available credit increases each period on the prior period’s available credit balance. At any time, the line of credit can be accessed for incidental cash or even converted to monthly term or tenure payments, similar to annuity payments.

 

Using these active strategies, cash reserves are made available upfront and incorporated into a plan, giving your portfolio the maximum amount of time to grow, possibly the best chance of meeting your financial needs in retirement. You can still live in your home without making monthly mortgage payments (provided you pay taxes, insurance and maintain the property), feel confident about being financially prepared for emergencies, have a growing line of credit available to you while improving your Social Security opportunity - all while maintaining your desired quality of life. Simple and effective.

Common uses of a reverse mortgage loan

  1. Pay off an existing mortgage (required as part of the loan) and eliminate monthly mortgage payments
  2. Make retirement savings last longer
  3. Use a “standby” HECM reverse mortgage growing line of credit to preserve investment accounts during market downturns or build a safety net for unplanned emergencies, home repairs and healthcare expenses
  4. Supplement your retirement income with monthly payments
  5. Use a HECM for Purchase loan to buy a home that better fits your needs
  6. Support aging in place expenses, like caregiving and home modifications

Consumer safeguards

A number of consumer safeguards have been established to protect reverse mortgage borrowers. These protections ensure lenders like us are doing their jobs right, and that you and your family have a thorough understanding of how a reverse mortgage loan works. The following consumer safeguards were instituted for your benefit.

4 Common questions

1. Does the bank own my home?
 No. Reverse mortgage borrowers retain ownership, and the loan is secured by a lien on the home. They are not relinquishing title or ownership using a reverse mortgage loan, but borrowing against the value of the home. Borrower(s) may not lose their home under normal circumstances as long as they comply with loan terms including paying for taxes, insurance, and maintaining the property. Also an escrow account is not typically set up to pay for taxes and insurance.

 2. What are the different ways I can receive my reverse mortgage funds?
Reverse mortgage loan funds can be disbursed in a number of ways: full or partial lump sum, as a line of credit, through monthly payments, or a combination of any of these.

3. What if the loan amount ends up more than the value of the home? Who will be responsible for the loan?
Reverse mortgages are non-recourse loans. What this means is that if somehow the loan balance ends up surpassing the value of the home, the lender cannot collect more than the value of the home. Under the HECM program, the difference between the loan balance and the home value is covered by the Federal Housing Administration’s (FHA) insurance fund.

4. Will a reverse mortgage loan affect my Social Security, Medicare or pension benefits?
No, these benefits will not be impacted. Reverse mortgage loan funds are considered loan proceeds and not income. However, Medicaid and other asset-based benefits may possibly be affected. What’s more, the longer you wait to access Social Security benefits, the more you may receive. A reverse mortgage can help delay accessing Social Security in order to boost your lifetime retirement income.


Did you know you can buy a home with a reverse mortgage loan?

A HECM for Purchase loan combines a reverse mortgage with the equity from the sale of your previous home - or from other savings and assets - to buy your next primary home in a single transaction. Regardless of how long you live in the home or what happens to your home’s value, you only make one down payment towards the purchase, provided that you pay taxes, insurance and maintain the property.

Additional advantages include:

  •  No monthly mortgage payments**
  •  Increase your purchasing power
  •  Contributes toward the financing of the new home purchase
  •  Rightsize to a lower maintenance home
  •  Buy a home closer to family and friends
  •  Lower your cost of living during retirement

**Failure to pay taxes, insurance, and maintain the property could result in foreclosure.

 CALL TODAY to speak with a reverse mortgage professional.

                   (888) 944-6262