As noted by Steven A. Sass of Boston College Center for Retirement Research: “Retirement planning generally focuses on the use of financial assets. However, home equity is the largest store of savings for most households entering retirement.” In fact, the 2010 US Census shows that the average American 65 and older has over 82% of their net worth tied up in their home equity. Once a senior decides to use this equity to assist in their retirement the most common method has been to sell their home and move into an apartment or smaller home. In order to accomplish this, a retiree will have to pay 7 to 8% of their entire home value to pull this equity out. If they are moving into an apartment the retiree will have miss out on all the future gains the home they sold would have given them in the form of increased home value. Those that move into a smaller home, will still have equity gains, but on a much smaller scale.
The Home Equity Conversion Mortgage (HECM) Reverse Mortgage (RM) program allows for a retiree over 62 to stay in their home and gain access to the equity that they worked so hard to gain over the years. The less savings attained by a retiree, the larger percentage their home equity tends to be of that wealth, for retirees that have amasses a larger amount of wealth, their home equity is a smaller portion of that wealth and a reverse mortgage can still be a vital way to access this money; although it will be used for different purposes than those at a lower income level.
Those at the well funded level ($175k to $1,000,000 plus in financial wealth) have typically used the RM for: Prolonging retirement income, Family Gifting, maximizing legacy, Protecting home equity, funding long term care insurance, remodeling, investment money, aging in place, 6% growth on RM LOC, easily accessible slush fund, and travel funds.
Those at the Constrained level ( $40k to $175k in financial wealth ) have used the RM for: Eliminating Mortgage payment, funding long term care insurance, Splitting assets in a divorce, increase social security check, funding posterity education, prolonging retirement income, oss of income from deceased spouse, reducing high cost debt, medical costs, and assisting family.
Those at the Underfunded level ( $0 to $40k in finanical wealth ) have used the RM for: Eliminating Mortgage payment, increase social security check, visiting grandkids, reduce high cost debt, medical costs, and having money for basic necessities.
With so many differing uses for a reverse mortgage a homeowner must depend on solid advice from their financial advisor. A homeowner can access their equity on a Forever Fixed rate, an Annually fixed rate, or a Monthly Fixed rate. The HECM program also provides the senior with the option of a guaranteed monthly check, a lump sum cash payout, or the option to leave the funds in a RM LOC that grows by around 6% annually (which can increase or decrease). With so many options inside of the HECM program, a homeowner and financial professional would be wise to choose a RM originator that specializes in only this government product and has the necessary experience to guide them.
To see what you qualify for seethe RM calculator here: HECM Calculator or contact Robert Krepps (877) 567-7476.