Here is a quick story that illustrates how a reverse mortgage can help free up cash for someone in their retirement years. This is a scenario from an actual client of a colleague of mine, David Heilman of HomeGrown Financial, that specializes in reverse mortgages.
Client Spotlight
We had the pleasure of working with a client recently who was referred by his Certified Financial Planner. We first established a meeting via Zoom with both the client and his advisor to make sure everyone understood exactly how the loan program works and what the expectations were in terms of the process.
The client’s goals and objectives were met as we:
- Paid off a small current mortgage
- Set up an initial draw for home improvements
- Put remaining funds in a line of credit for future needs
Worth noting that this line of credit is very different than a traditional home equity line of credit as it GROWS by 0.5% above the current interest rates. So, this client now has a growing line of credit, expanding as he ages and allowing for more borrowing power.
This was all accomplished using the FHA-Insured Reverse Mortgage which doesn’t require a monthly mortgage payment. The client is still responsible for paying his homeowner’s insurance and property taxes and of course the title/ownership of the home never changed. The loan will be paid in full when the client decides to sell the home, or lives there until death and then the heirs would decide if they want to retain the property (pay off debt) or sell. Any equity still in the home belongs to the estate/heirs!
Reverse mortgages aren’t for everybody, but in the right situation, they can be very beneficial as a source of income in retirement.
Please comment or send an email if you have any questions. Thanks!
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassemanagement.com
