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Christopher Beard

Are Reverse Mortgage's Gaining Momentum as a Financial Planning Tool?

Friday, March 1, 2013 - Article by: Christopher Beard - iReverse Home Loans - Message

Are Reverse Mortgage's Gaining Momentum as a Financial Planning Tool?

When reverse mortgages were first introduced back in 1961 they were initially designed for cash strapped seniors to tap into home equity to supplement retirement income and many still continue in this philosophy. However, Realtors, Elder Care Attorneys and even Financial Planners are endorsing the reverse mortgage for retirees as a forward thinking financial planning tool. For many seniors the deep-rooted idea was that choosing a reverse mortgage should only be a last resort option to fund monthly income after all other resources have been exhausted.Let's take a deeper look at some of the opportunities that can be afforded to senior homeowners and research of well-respected professionals in regard to reverse mortgage Line of Credit being used as forethought rather than an afterthought.

Reverse mortgages can help senior homeowners achieve many different purposes. You can use them to restore retirement funds that lost value in recent years of massive losses, plan for future health care expenses, provide economic security, eliminate a mortgage payment to improve current monthly cash flow, avoid tapping into retirement accounts too soon or before maturity or required withdrawals, or even buy a new home while keeping a nest egg and avoid mortgage payments. The way you choose to accept your funds depends on your long term plans for the proceeds and purpose of the reverse mortgage loan. Recently two known financial planning experts wrote an article in the Journal of Financial Planning regarding the use of a reverse mortgage as part of a long term planning tool and utilizing a an equity line reverse mortgage as a first line of action over a last resort action.

"Barry H. Sacks, and Stephen R. Sacks, both Ph.D.'s research concluded that against conventional wisdom that through a combination of a retirement portfolio and reverse mortgage equity line withdrawals that the cash flow survival rate was higher than if used as a last resort and provided a higher net worth after a 30 year period" Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income Repositioning Assets with Purpose

  1. Increase Retirement Reserves
  2. Pay for Long Term Care and HealthCare
  3. Purchasing Investment Properties
  4. Purchase a 2nd Home or Downsize

How A Credit Line Reverse Mortgage can be an Effective Tool for funding these Opportunities

Even if you don't absolutely need the funds today consider this interesting fact. Conceivably the most powerful HECM lure is that its credit line grows larger over time. This means that after closing on a reverse mortgage credit line the amount of cash available to you continues to produce returns at the current interest rate until you withdraw all of it, simultaneously your home equity and home value should normally continue to grow as well. Another feature is that any reverse finance cost rolled into the loan could essentially be washed out. The options could be endless and if you were afforded the ability to allow the money to grow for say 10 years before extracting it your estate could be left intact and the reverse accomplishing all that you wanted it to. HECM Line of Credit Example

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