• Debbie Nance

Retirement Strategies -Tapping Into Housing Wealth. Is it ever a good idea?



In the last few years the financial planning world has begun to take a deeper look into housing wealth to smooth the bumps and pitfalls that can occur financially even after retirement. (Loss of a spouse, declining health, not enough savings) There have been some very responsible and well thought out arguments making a case for older homeowners to utilize their housing wealth as a part of a complete retirement plan.


The tool being looked at for this is none other than the Home Equity Conversion Mortgage insured by HUD, commonly known as a “reverse mortgage” . After years of misunderstanding, bad actors and overly simplistic qualifying HUD has in the last few years tightened qualifying requirements, adjusted lending amounts and Mortgage Insurance Premiums making the FHA Home Equity Conversion Mortgage (HECM) safer for older homeowners all the while retaining some of its best features that financial advisors are now feeling comfortable about. Professionals are more often encouraging clients to think about factoring home equity into part of a complete financial plan.


How are folks using the HECM to improve their financial outcomes in their golden years? There are many new articles and even books that spell out different strategies. The biggest positive in the HECM arsenal is its flexibility. A HECM loan can be set up as a growing line of credit that is guaranteed to grow over time* no matter the direction of home values. It can also be set up as a monthly disbursement to the borrower for life (tenure) or for a period of time (term). These options can be adjusted over time depending upon the remaining available credit. And the homeowner can even continue to make mortgage payments should they wish to, as there are no prepayment penalties on a HECM loan. It’s that flexibility that makes the loan so useful even though it takes a bit longer to grasp the nuances of the loan.


One benefit of the HECM loan I would be remiss in not reporting about is the fact that borrowers are never required to make a payment of principal or interest. Borrower requirements though are similar to traditional mortgages in the fact that the homeowner is required to pay the ongoing property charges such as Homeowners Insurance, Property Taxes and HOA Dues (if applicable). A HECM loan also requires the borrower to live in the home as their primary residence.


Here are some of the strategies that financial advisors are considering suggesting in appropriate situations.

  1. Payoff an existing mortgage - increasing monthly cashflow.

  2. Fund Home Renovations to allow for aging in place.

  3. Use tenure payments to reduce portfolio withdrawals.

  4. Taking tenure payments as an annuity alternative

  5. Social Security Bridge - to delay taking social security

  6. Pay Premiums for Long Term Care

  7. Line of credit as a contingency fund for spending shocks (home care, health expense, divorce)

  8. Tax bracket management or pay taxes for Roth Conversions.

  9. Set up a growing line of credit as a “self-funded” long term care policy alternative.

Many older homeowners have a large part of their overall wealth wrapped up in thier home equity and it makes perfect sense to incorporate home equity wealth into your retirement plan.


If you’d like to find out more about how housing wealth can be a part of a holistic approack to retirement planning you might enjoy this book:

Reverse Mortgages, How to Use Reverse Mortgages to Secure Your Retirement, by Wade D. Pfau, Ph.D., CFA


If you'd like to take a deeper look at whether utilizing your home equity as part of your retirement planning through the use of a HECM loan, please call me, Debbie Nance, at (951)283-2983

20 views

Borrower must occupy home as primary residence and remain current on property taxes, homeowner's insurance, the costs of home maintenance, and any HOA fees.

Mutual of Omaha Mortgage, Inc., NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Alabama Consumer Credit License 22123; Alaska Broker/Lender License AK1025894.  Arizona Mortgage Banker License 0926603; Arkansas Combination Mortgage Banker/Broker/Servicer License 109250; Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License 4131356; Loans made or arranged pursuant to a California Finance Lender Law license, 60DBO93110; Colorado Mortgage Registration 1025894; Connecticut Mortgage Lender License ML-1025894; Delaware Lender License 028515; District of Columbia Mortgage Dual Authority License MLB1025894; Florida Mortgage Lender Servicer License MLD1827; Georgia Mortgage Lender License/Registration 46648; Hawaii Mortgage Loan Originator Company License HI-1025894; Idaho Mortgage Broker/Lender License MBL-2081025894; Illinois Residential Mortgage Licensee MB.6761115; Indiana-DFI Mortgage Lending License 43321; Iowa Mortgage Banker License 2019-0119; Kansas Mortgage Company License MC.0025612; Kentucky Mortgage Company License MC707287; Maine Supervised Lender License 1025894; Maryland Mortgage Lender License 21678; Massachusetts Mortgage Broker and Lender License MC1025894; Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022452; Minnesota Residential Mortgage Originator Exemption MN-OX-1025894; Mississippi Mortgage Lender 1025894; Missouri Mortgage Company License 19-2472; Montana Mortgage Broker and Lender License 1025894; Nebraska Mortgage Banker License 1025894; Nevada Exempt Company Registration 4830. Licensed by the New Hampshire Banking Department, Mortgage Banker License 19926-MB; Licensed by the New Jersey Banking and Insurance Department.  New Jersey Residential Mortgage Lender License 1025894; New Mexico Mortgage Loan Company License 1025894; North Carolina Mortgage Lender License L-186305; North Dakota Money Broker License MB103387; Ohio Residential Mortgage Lending Act Certificate of Registration RM.804535.000; Oklahoma Mortgage Lender License ML012498; Oregon Mortgage Lending License ML- 5208; Pennsylvania Mortgage Lender License 72932; Rhode Island Lender License 20163229LL. Rhode Island Loan Broker License 20163230LB; South Carolina BFI Mortgage Lender/Servicer License MLS-1025894; South Dakota Mortgage Lender License ML.05253; Tennessee Mortgage License 190182; Texas Mortgage Banker Registration 1025894; Utah Mortgage Entity License 8928021; Vermont Lender License 6891; Virginia Mortgage Broker and Lender License, NMLS ID #1025894 (www.nmlsconsumeraccess.org); Washington Consumer Loan Company License CL-1025894; Wisconsin Mortgage Banker License 1025894BA; Wyoming Mortgage Lender/Broker License 3488.  (866) 200-3210.  Subject to Credit Approval.  

Charges such as an origination fee, mortgage insurance premiums, closing costs and/or servicing fees may be assessed and will be added to the loan balance.  As long as you comply with the terms of the loan, you retain title until you sell or transfer the property, and, therefore, you are responsible for paying property taxes, insurance and maintenance.  Failing to pay these amounts may cause the loan to become immediately due and/or subject the property to a tax lien, other encumbrance or foreclosure.  The loan balance grows over time, and interest is added to that balance. Interest on a reverse mortgage is not deductible from your income tax until you repay all or part of the interest on the loan.  Although the loan is non-recourse, at the maturity of the loan, the lender will have a claim against your property and you or your heirs may need to sell the property in order to repay the loan, or use other assets to repay the loan in order to retain the property.

These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. For licensing information, go to:www.nmlsconsumeraccess.org

  • YouTube Social  Icon
  • LinkedIn Social Icon
  • Facebook Social Icon
  • Twitter Social Icon

© 2018 by Debbie Nance.