After retiring from the corporate world five years ago, you have continued your tradition of treating the kids and grandkids to a three day lakeside family reunion at a state park. Now, after recent storms and power outages wreaked havoc in the lives of one of your children’s families and, to a lesser degree, disrupted the lives of the two others, you’ve decided to offer both yourself and the kids a one-time additional “gift”.

After reading about solar panels, you investigated the costs and feasibility of having panels installed on the children’s homes. None of the three homes proved to be a good candidate (based on neighborhood, the type and state of the present roof, and the probable need to relocate over the next five to ten years). You are now thinking of paying for installing backup generators in each of the kids’ homes along with one for your own. While you are in a position to follow through on the plan, you’re reluctant to tap into your investment accounts during what you perceive is an uncertain outlook for the stock market.

Consider using your housing wealth to fund the costs of installing backup generators in each of the four homes. Your own home will serve as sole collateral for the loan, eliminating the need to tap your investment accounts. Whatever portion of your home equity has not been tapped will continue to be credited with growth at the same rate as the interest being charged on the loan, and there will be no need to make monthly mortgage payments.

A reverse mortgage on your home will provide the financial “back-up power” during future storms and power outages.

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With neither of you having had the benefit of a college education, you’re proud of the fact that both your children and now your one grandchild are all college graduates. In fact, your granddaughter is planning to continue her studies, working towards a medical degree.

Retired three years now, you are not in a position to finance the entire cost of grad school, but you would like to help out in a significant way. You’ve been told that you are each allowed to make a once-a-year gift of $17,000 ($34,000 combined) without being subject to gift and estate tax, but you would like to give her $60,000 this year, reserving the decision about the amount of future gifts.

You’re not terribly concerned about the additional gift and estate tax (you don’t have a large enough estate for this to ultimately present a problem), but you would like to avoid filling out a gift tax return. Of equally important concern is choosing which accounts to draw from. With your home long fully paid for, your regular income has been coming from two fixed life annuities and through systematic withdrawals from each of your retirement accounts. You do have six figures in liquid and semi-liquid investment accounts.

While we offer no tax-related advice, we can refer you to the Gift Tax Education Exclusion for Tuition. To qualify for that exclusion, you should make the tuition payment directly to your granddaughter’s school.

From which of your accounts should the money be drawn? Consider using your housing wealth by setting up a reverse mortgage line of credit. With no monthly mortgage payments due (the home itself serves as sole collateral for the loan), you’ll be able to decide on the amount and the timing of each gift you choose to make. Meanwhile, whatever portion of your home equity has not been tapped will continue to be credited with growth at the same rate as that being charged on the loan.

Is there a doctor in the house? “Not yet,” you’ll be able to say, “but, with our help, there soon will be!”

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A longtime dream of yours has been treating your entire extended family (some forty people with all the in-laws, cousins, and kids) to a week-long getaway reunion in the mountains. You want to do this before the youngest of the grandkids starts college next year. Rather than shaking up your IRA accounts, depleting savings with a big withdrawal, or reducing the monthly income you use for your own lifestyle needs, the two of you have come to the decision to borrow against your home, repaying that loan over several years. Obviously, the high interest rate climate is of concern, but if you’re going to realize the dream, you’ve concluded, it has to be while you are in good health and whole the grandkids will see this as an adventure, not an annoyance.

In using the equity in your home to finance the “dream getaway”, consider tapping your housing wealth using a reverse rather than a “forward mortgage”. While interest rates are indeed higher now than in recent years, home values have risen as well, no doubt increasing your equity in the home. With reverse mortgage financing, there will be no obligation to make monthly mortgage payments*; the loan will not “come due” until you either sell the home and move, or until the second of you has passed. What’s more, whatever portion of your equity is not needed now will be credited with growth at the same rate as the interest being charged on the outstanding loan balance.  Should other needs arise in future, there will be a cash “reservoir” that can be tapped.

As you’ve already realized, the timing needs to be right to accommodate the schedules of the college-bound young ‘uns. The flexibility of a reverse mortgage will allow the two of you to realize the dream sooner – and pay for it either sooner or later.

*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.

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After months and months of dabbling with the idea of moving to a retirement community, the two of you, now in your mid-seventies, have decided to spend your remaining years in your own home. In the past, you’ve taken pride in being property maintenance do-it-yourselfers, but going forward, you’ll be willing to hire help as needed.

In fact, you are going to need contractor help executing some extensive renovations, primarily centered on adding a full master bedroom with walk-in closets and two full bathrooms to the ground floor. The cost for that work, which you estimate could be completed over half a year’s time, will be in the neighborhood of $85,000.

Your challenge is going to be finding the most efficient way to obtain that funding. In talks with your credit union, two different plans have been offered. Meanwhile, you’re assessing your own ability to cover a large portion of the costs.

Up until now, you’ve been supplementing pension and social security income with quarterly withdrawals from your joint investment account, and you are reluctant to further tap those sources, particularly in today’s uncertain market. Meanwhile, your largest single investment is stock you inherited from your grandfather years ago, then worth around $12,000; today, that stock is worth ten times that. Aside from the sentimental consideration (you had intended to leave those shares to your own grandchildren someday), in a sale, too much of the value would be lost in capital gains tax.

Instead of taking out a second mortgage on your home, you might consider accessing your housing wealth through a reverse mortgage, set up as a line of credit, which you would tap, paying for each stage of the remodel work as needed. As with any form of financing, there will be borrowing costs, but you’ll avoid the need to “upset” your systematic withdrawal plan, nor will you generate capital gains tax on the sale of stock. Yet another positive is that any unused portion of the equity will be credited with growth at the same rate as the interest being charged on the outstanding reverse mortgage loan balance.

With a reverse mortgage home equity line of credit, you’ll be able to comfortably “settle in” to your newly adapted and reconfigured residence.

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After much home-searching and soul-searching, the two of you have decided to say put in the home you’ve furnished, decorated, repaired, and remodeled over the past thirty-seven years. The next step, you’ve decided, is to install solar roofing, including charging stations for the electric vehicles you plan to purchase in the next year or so. Encouraged by several friends in your zip code who have gone this route, you have begun getting quotes from different solar installers. Although you plan to apply for Indiana’s energy savings incentive program, in addition to whatever federal incentives are available, you realize it will take quite a number of years to recover your up-front investment. At the same time, the monthly utility rates for your (all-electric) home have risen so dramatically, you’re determined to take back control.

How to best pay for the conversion is essentially a financial management dilemma, You could do the installation on a payment plan, refinance the home, or tap your retirement portfolios (most of which are in IRA rollover accounts, and you doubt this is an ideal time to take assets out of the market.

As an alternative to any of the three financial options you’ve mentioned, you might consider a reverse mortgage, using the equity you’ve built up in the home to finance the solar panel installation. Not only will you avoid market timing and the tax planning decisions relative to making withdrawals from rollover accounts, you’ll be able to take advantage of government and state incentives without the additional costs of an installment plan. whatever portion of your housing wealth is not needed for the project, will grow at the same rate as the interest being charged on the reverse mortgage loan.

Meanwhile, there will be no periodic payments due to the mortgage company; the loan will not need to repaid until such time as you sell the home, move, or die. In fact, neither you nor your heirs will be liable for any part of the loan that exceeds the value of the home at that time.

All that furnishing, decorating, repairing, and remodeling you’ve done over the past decades? Financing the solar conversion will allow you to reap the benefits in terms of energy cost savings.

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While your original plan had been to work through your early seventies, a downsizing three years ago forced you into retirement at age 64. Now, even working various part time gigs, you have been unable to retire your nearly $40,000 in credit card debt. Thankfully, your home is mortgage-free and in good shape, and you have no car payments. You had been putting off this step, but are now considering taking out a mortgage on the house. Although the interest rates you’re being quoted are far higher than they would have been had you done this a couple of years back, you’re being panicked by the dramatic rise in your monthly costs on the cards.

As an alternative to a second mortgage, you might consider a reverse mortgage, using the equity you’ve built up in the home to retire the credit card debt once and for all. Certainly the reverse mortgage is itself a loan, but with no monthly payments* due of either principal or interest, you might experience great relief, allowing you time to stabilize your day to day finances. Meanwhile, whatever available portion of your housing wealth that is not needed for paying off the credit cards will be growing at the same rate as the interest being charged on the reverse mortgage loan.

That reverse mortgage loan, in turn, does not need to be repaid until such time as you sell the home, move, or die. Even then, neither you or your heirs will be liable for any part of the loan that exceeds the value of the home at that time.

Changing the nature of your debt can relieve the pressure caused by rising credit card rates.

*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.

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Although the remarkable profits you saw friends and neighbors making on the sale of their houses, one important decision you and your wife had made was that, post-retirement (hers last year, yours five years ago), you would continue living in your home, hopefully spending the rest of your lives “in place”.

Recently, however, predictions of recession and news of rising interest rates have begun to concern you. True, your own home mortgage was retired years ago, but as your living costs have demonstrably escalated; you have been forced to reconsider certain travel plans and “luxury” spending, and your regular, carefully planned SWIP (what your planner called your Systematic Withdrawal Income Plan) has needed to be bumped up. Neither of your two children has every expressed interest in inheriting the home, so you have begun to entertain thoughts of selling while the value is still high and moving into a smaller property, thus “freeing up” excess cash.

As an alternative way to “lock in” the value of your home at this time of relative high real estate pricing, you might consider tapping into the equity of your home using a reverse mortgage. HECM line of credit. There may or may not prove to be a “bubble burst” in home values in the future, but meanwhile, you would have a way to augment your SWIP by tapping your housing wealth. So long as you continue to maintain and insure the home, you will be assured of being able to live there the rest of your lives, with no monthly payments due on the loan. Whatever portion of your housing wealth available in your line of credit that is not being used will be growing at the same rate as that being charged on the reverse mortgage loan.

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After retiring four years ago at age 63, you have been supplementing your pension and investment income with dividends from a one-man electrical and plumbing repair business structured as an LLC. The arrangement has, overall, worked quite well, but, in order to expand, it is now important for you to purchase several more sophisticated tools and pieces of equipment.

Your own home is in shape and now paid for, but the additional cash flow resulting from retiring the mortgage has long ago been absorbed in building the business. Your plan is to remain in your home, and you’re now considering a refinance, which you see as preferable to generating more taxable income by selling tax-deferred account assets….

As your tax advisor has no doubt explained, whenever you put personal money into your LLC, you can label it as either equity or a loan to your business. But, rather than taking out a new forward mortgage or home equity line of credit, you might consider tapping your housing asset in the form of a reverse mortgage.

Importantly, with reverse mortgage funding, there will be no monthly mortgage payments due*, and withdrawals you make may be tax free**. You would take dollars as needed out of your housing wealth, using those dollars to make contributions to your LLC, making equipment purchases in the name of the business.

Meanwhile, the available unused portion of your housing wealth will be growing at the same rate as that being charged on the reverse mortgage loan balance.

*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. **Not intended as tax advice. Consult your tax advisor.

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With you and your husband of forty years on the brink of retirement, you’ve taken on the job of researching planning options. (While all financial decisions will always be made jointly, your work schedule happens to be a bit more flexible, and so you’ve taken on the responsibility of gathering information and conducting meetings with advisors.). One big question up for discussion is whether both of you should begin collecting social security benefits. In a recent conversation with a neighbor, you were warned about the so-called “tax torpedo” that happens when additional taxes have to be paid because half your social security benefits are considered part of your taxable income.  The idea, the way you understand it, is that it is smart to delay taking social security to age 70 to the extent you can afford to do without that money coming in.

Your home is fully paid for, but still, you’re not sure you want to afford to do without the income from social security.  Whatever extra travel and luxuries you can afford going forward, you believe in enjoying those while you are most physically able to enjoy them. You have three children, but they are not dependent on you, nor would you want to be dependent on their help.

Your financial advisor and tax accountant can “run numbers’ for you showing the tax ramifications related to the timing of your social security benefits. Meanwhile, however, it seems one planning element you have not considered is using the equity built up in your home. Withdrawals from a reverse mortgage line of credit, made at times you want to enjoy those “extras” in terms of travel or luxuries might allow you to defer social security benefits for either or both of you. So long as you keep up your property taxes and insurance, you will not need to make any monthly payments on the reverse mortgage.  The unused portion of your housing wealth available in the line of credit will grow at the same rate as the interest being charged on the loan balance.

In the process of doing all this valuable research about different approaches to managing your retirement finances, don’t forget one very important “treasure trove” – the equity you’ve build in your own home.

https://mutualreverse.com/david-garrison/