So much of our lives are spent in preparation for retirement. As young people, we are taught to get a good education so that we can earn enough to live comfortably and get money saved for the future. Once we graduate and get a good job, we begin to put a little money away for the future. Hopefully, we have 401ks and other investments earning good returns as recommended by a trusted financial advisor. We also need a slush fund for a rainy day. We have a good amount of money put away in a savings account. But is that money really doing much for us?
According to the FDIC for the week of June 1st 2020, the national average of the interest on savings accounts on jumbo or non-jumbo accounts is only 0.6%. That is not much of a return for all that has gone into our savings accounts. There are some standouts, online banks that may pay a little higher. There is an option that allows senior homeowners to get around a 5.5% growth rate (this rate mirrors the fully indexed rate charged on money taken out on the reverse mortgage – Rate + margin +.50% monthly MIP. The growth rate will go up or down annually based on the index rate fluctuation) on the money they leave in a Reverse Mortgage Line of Credit; this money can be taken out at any time until the full amount has been used. This may be done on a Home Equity Conversion Mortgage (HECM reverse mortgage) and choosing to leave some of your qualified monies in a Reverse Mortgage Line of Credit. this 5.5% growth is compounded annually. So, if one were to start off with $100,000 in their line of credit, one year later it would be at 105,500. Assuming the same growth the next year it would be roughly $111,302.50. This same amount of money left in the average savings account would be 100,600 by the end of the year and $101,203.60 by the end of the 2nd year. The HECM LOC growth would be a net gain of $10,098.90 in 2 years over the average savings rate! Of course, the savings rate or growth rate can change. The growth rates are fixed for a year at a time on the HECM Annual product. They can adjust up or down up to 2% per year. The above example is for illustrative purposes only and similar results cannot be guaranteed. (The growth rate assumes the borrower did not draw upon the line of credit during the time period discussed).
Not only does a HECM provide growth on your qualified money that you haven’t used, but this loan product also eliminates your monthly mortgage payments. You still own the home, you can sell it or refinance it at any time. You just need to keep the home in proper repair, pay your property taxes, home insurance, and any HOA/condo fees; the things you are doing already. An added bonus is if one decides to make a payment on the HECM loan, the amount paid not only goes to pay down the loan, but the exact same amount is added to the available Line of Credit. You can get the best of both worlds, paying down your mortgage and increasing the amount of money in your HECM Line of Credit.
If this sounds like something that may interest you, please reach out to me and I would be happy to discuss it in more detail with your specific retirement scenario. Robert Krepps, NMLS #255191, at HighTechLending Inc today to discuss how a reverse mortgage may be able to help you (877) 567 – 7476 or firstname.lastname@example.org .
HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.