STUART – Housing is the biggest source of wealth for Americans over 65, according to a 2010 Boston College Center for Retirement Research, “using your home for income in retirement.”
On average, the value of home equity is about 35% greater than the total value of all financial assets such as savings, brokerage accounts, and pensions.
Clients need advice to manage their most important financial asset. Typically, they turn to financial advisors, CPAs, lawyers, or family members to help them make decisions about this important asset.
Many clients think they should pay off their mortgage before retiring.
That’s fine, if they have adequate financial assets. But it’s not for everyone, not if paying down the mortgage reduces cash flow, leaving the customer without sufficient cash for emergencies, repairs, health issues and other expenses.
Once the equity is in the home, it’s important to keep up to date with options to recover the equity if needed, which can be done with a reverse mortgage.
Reverse mortgages continue to evolve and gain acceptance as prudent strategies for the right client.
They now offer greater security through federal insurance and candidate screening.
They also benefit from today’s low interest rates, which means higher potential payments for borrowers.
Probably the most amazing feature of the home equity conversion mortgage is the line of credit and its ability to grow. This is the main reason why reverse mortgages are useful in financial planning.
Funds left on the line of credit (LOC) do not earn interest, so they do not cause an increase in the loan balance.
It is an indefinite loan that allows the borrower to borrow, repay and borrow again without restriction. It is liquid equity, which means it is easily convertible into cash.
Funds are transferred to the borrower’s bank account within 5 business days.
The LOC is secure. It is not capped, reduced, frozen or eliminated due to market conditions or if property values drop, as might be the case with a HELOC.
And finally it GROWS!
Donna M. Linton is a professional Reverse Mortgage Advisor with six years of experience. She currently works at Sterling Mortgage Services, 100 Albany Avenue, Stuart. Contact her at 772-485-5291.
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