If you had invested $70,000 in the stock market when you were 25 years old and over the next 40 years it grew to be worth $400,000; what would you do with it in retirement? Go visit a country you have always wanted to see? Remodel the kitchen? Use it to pay for your retirement? Bury it in the back yard?
Would you leave all of your stock market earnings invested in high risk stocks once you get to retirement age? No, you would pull some money out and put it in something safe like an annuity, put some in a CD, or maybe in other real estate or insurance products. You would want to diversify your risk. Just like the stock market can have booms and busts, in California we know that our home values will boom and bust every ten years or so. Why would you leave that amount of money subject to so much volatility?
For those of you that have your home paid off or significantly paid down, there is a sense of pride that you have been wise with your funds. Most people fail to see that their home equity is the benefit of a good investment made in a home years prior that has paid off, just like your pension or 401k account. You wouldn’t just sit on the money in your 401k and never use it, why would you leave your home equity essentially buried in the backyard?
How many years do we have before there is another drop in housing prices? A reverse mortgage allows you to separate half or more of your equity from your home so that you can protect it from the volatile California market. Why not diversify your risk by investing in financial products, CD’s, or insurance products.
Most people are unaware you can actually get a reverse mortgage and protect your equity without having to pay much interest at all. This is accomplished with a RM LOC (reverse mortgage line of credit). A 76 year old with a home appraising for $400,000 can get a RM LOC of $240,000, this money can be taken out and diversified in different financial products with no monthly mortgage payment to you. There is a low interest rate calculated on the money you have taken out, but that will be paid by the heirs out of the sale or refinance of the home. Or you can leave the money in a RM LOC and there is no interest charged on the money you have left in your RM LOC.
As a bonus, the money left in the RM LOC receives compound growth every year. The average RM LOC is growing by almost 5% a year. In this example, if you leave the $240,000 in your RM LOC for an entire year, you will have $251,640 available 1 year later. If you leave this money in your RM LOC for another year you will have $263,844 available 1 year later. This continues at almost 5% growth each year for any money left in your RM LOC; if interest rates rise or fall, your growth rate rises or falls by the same amount.
You may want to ask yourself, which is safer, leaving all of my equity tied up in the California boom and bust market, or protecting over half of it with a reverse mortgage? If you have any questions regarding the concepts discussed in this article, or would like to see how much of your equity you can protect, you may call, toll free, 877-567-7476.