Why Financial Advisors are Reconsidering Reverse Mortgages
A reverse mortgage could help your clients age 62 and older to effectively leverage an important retirement asset: home equity. Thanks to recent academic research that demonstrates the value of FHA-insured* Home Equity Conversion Mortgages (HECMs), reverse mortgages are gaining acceptance as a valuable and effective tool to help satisfy the challenges of meeting retirement goals for decades.
Design Solutions for Your Clients
With its flexible payment options, a reverse mortgage can give borrowers more financial control and can serve as an excellent risk management tool, while keeping productive assets under your management — helping their portfolios last longer. As a tax-efficient strategy, clients can use a reverse mortgage to reduce their income taxes1 by lowering their withdrawals from qualified accounts. Other uses include refinancing aconventional mortgage with a HECM, so as to eliminate a client's monthly principal and interest payment. As with any home-secured loan, the borrower must meet their loan obligations, keeping current with property taxes, insurance, maintenance, and any homeowners association fees. Or perhaps using a HECM to finance the purchase of a home, thereby reducing the amount of cash older clients have to "put down" when downsizing.
HECM Credit Line: A Unique Safety Net Offering a Growth Feature and Flexible Repayment
Clients can establish a HECM credit line and draw on it as needed for future expenses, such as health care costs. A unique feature of the HECM credit line is the amount available to clients will grow2 monthly, independent of any change in home value. This feature provides additional available cash in future years that may prove valuable as clients savings are depleted.
To see the pros and cons of a Reverse Mortgage Line of Credit vs. a traditional Home Equity Line of Credit (HELOC), click here.
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|1||Not tax advice. Consult a tax professional.|
|2||If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.|