The subject of Reverse Mortgages has become one of the hottest of financial topics. Hardly a week goes by when we don’t run across an article describing how one financial expert or another has changed their position from Reverse Mortgage skeptic to enthusiastic advocate. On this blog we’ve recently offered links to several authoritative articles (including this article from a few months ago in the Wall Street Journal) describing a growing list of advantages to these once-criticized financial vehicles.
Here at AgingOptions as we help create retirement plans for our many clients, Reverse Mortgages can be a powerful tool, and we frequently recommend homeowners consider them. Because they are also complex financial instruments, however, we urge our clients to consult with trusted advisers like our friends at Kiel Mortgage to find out if a Reverse Mortgage is right for each person’s individual circumstances. Recently, Laura Kiel sent us a paper describing “one of the most powerful options available” to homeowners: the HECM Line of Credit.
First, a bit of definition: HECM stands for Home Equity Conversion Mortgage. The HECM was created by the federal government’s Department of Housing and Urban Development as a safe, FHA-insured reverse mortgage vehicle, which basically allows homeowners to “convert” a portion of their home equity into liquid assets. According to the Kiel Mortgage piece, written by associate C.E. Ted Butler, there is still confusion among many homeowners. “Many people don’t realize that there are Reverse Mortgages, and then there is the FHA Home Equity Conversion Mortgage created by HUD,” Butler writes. “And while all FHA HECM’s (Home Equity Conversion Mortgage) are Reverse Mortgages, not all Reverse Mortgages are the safe, government insured Reverse Mortgage from HUD.”
A big, big advantage of the HECM is its accompanying line of credit. In fact, for some retirees, the availability of this protected, expanding HECM Line of Credit is reason enough to take out a reverse mortgage whether the retiree expects to need access to his equity or not. Once the HECM is approved, your line of credit actually continues to expand, growing at a rate set by HUD. Even in the event of a future decline in home values, your line of credit is guaranteed. Once you decide to tap into your credit line, funds you withdraw are tax free. And remember, with an HECM you’ll never have to make payments until you or your spouse leaves your home permanently, at which time the loan is repaid through the proceeds of the sale of the home.
When you combine the added safeguards that Home Equity Conversion Mortgages now include with the availability of a growing, tax-free line of credit, it’s no wonder that many experts who were once highly skeptical of reverse mortgages now sing their praises!
Still, you need all the facts from a trusted expert before you charge ahead with a Home Equity Conversion Mortgage. As Kiel Mortgage’s Ted Butler asks, “Is the FHA Reverse Mortgage the answer to all home owners’ needs? No, sadly there is no ‘silver bullet’.” Nevertheless, he continues, the HECM “can certainly help more senior home owners live with greater safety, security and financial independence.”
Whether it’s a Home Equity Conversion Mortgage or any other financial instrument, we welcome the opportunity to advise you in the best ways to protect your assets in retirement. Financial protection is just one aspect of a comprehensive retirement plan which we call a LifePlan. Your LifePlan will also include a plan for your legal affairs, your medical needs, your family communication and your housing choices. With a LifePlan in place, the road ahead will be far more certain than it may seem today!
How can you get started? Attend a free, information-packed LifePlanning Seminar. The Upcoming Events tab on this website has all the information, and that’s also where you can register for the date and time of your choice. It will be a pleasure to meet you at a future LifePlanning Seminar.
And if you have questions about the Home Equity Conversion Mortgage, contact us and we can put you in touch with one of our trusted experts who can guide you into making the decision that’s right for you.