Retirement researchers make a new case for reverse mortgages
A reverse mortgage could help your clients age 62 and older to effectively leverage an important retirement asset: home equity. Thanks to new borrower protections and academic research that demonstrates the value of FHA-insured* Home Equity Conversion Mortgages (HECMs), reverse mortgages are gaining acceptance as a valuable and effective tool to help satisfy the challenges of meeting retirement goals for decades.
A growing number of retirement researchers, such as Harold Evensky, John Salter, and Wade Pfau, have conducted numerous studies to evaluate the pros and cons of a reverse mortgage, along with its potential uses and value in retirement income distribution planning. These leading researchers have all agreed that the reverse mortgage credit line offers
HECM Line of Credit: A unique safety net offering a growth feature and flexible repayment
Clients can establish a HECM line of credit and draw on it as needed for future expenses, such as healthcare costs. A unique feature of the HECM line of credit is the amount available to clients will grow† monthly, independent of any change in home value. This feature can provide additional income-tax-free‡ funds in future years, which may prove valuable as clients’ savings are depleted.
With its flexible payment options, a HECM can give eligible clients more financial control and can help you design more solutions for your clients. It can serve as an excellent risk management tool that can help keep productive assets under your management and help their portfolios last longer.
According to Wade Pfau, “The line of credit provides a way to create a more efficient retirement income strategy while also serving as a hedge, if the client’s home value were to fall. It is essentially a put option on the value of the home.”
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