When you retired from full time employment just four years ago, you never imagined becoming a “poster child” for the “negative sequence of returns” you’d read about in the magazines and journals..  Divorced ten years ago, you were awarded sole ownership of your home, and are only months from totally retiring the mortgage on it. As a small business coach, you do bring in a semi-regular income stream to augment the monthly systematic withdrawals from your IRA Rollover Account and your Social Security benefit. 

In recent months, you have been in prospecting mode for new coaching clients, while also moonlighting as a “picker” at local retailer in order to keep up with rising costs. Normally a patient investor with an eye on long term rewards, you have always understood that there will be market fluctuations. Now, however, you’re undeniably concerned with the drop in value of the Rollover account, watching the cascading effect (downwards) exacerbated by your regular cash withdrawals. You’ve considered taking out a home equity line of credit as a temporary income “fix”,  but with a near-term meaningful stock market rally seeming less and less likely, that  would feel like going from the proverbial frying pan into the fire.

It appears that the equity you’ve build in your home might provide a solution, not in the form of a second forward mortgage, but with a HECM reverse mortgage set up as a line of credit. In accessing your housing wealth in this way (substituting tax-free withdrawals from your own home equity for those taxable withdrawals from the IRA account), you might well be in a better position to weather the current stock market turbulence without dangerously drawing down your investments.

With a reverse mortgage line of credit, your home equity can function as a storm shelter during stock market turbulence. 

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

The past three years have, unfortunately, not been good ones for the two of you. Although you had generally been very prudent about managing your finances, you were forced into taking retirement years earlier than planned, because your employer suffered major setbacks due to the pandemic. (You had originally planned to work full time until age 70. Instead, unable to find full time replacement work, you have been working part time for a local merchant.) Your wife, meanwhile, suffered through several periods of ill health, further reducing the household income. Health wise, things have taken a turn for the better, but you are beginning to be have serious budgetary concerns and have been forced to make only minimum payments on your credit cards. So far, you have been able to totally abstain from touching either of your retirement accounts (your SEP from the company and her IRA). With interest rates unlikely to be lowered anytime soon, you realize that the timing is not advantageous for taking out a second mortgage on your home (the first mortgage has just three more years to go). Meanwhile, your adult children, while extremely loving and caring towards you, are not in a position to be of help..

Amidst all the setbacks, you’ve been able to build equity in a very important asset – your home. Now, establishing a reverse mortgage line of credit might be a pathway for handling your obligations, including both the existing mortgage balance and the credit card debt. The most threatening aspect of your current situation is, in fact, the credit card debt, because, should interest rates continue to rise, not only with those minimum payments be more, your credit rating might be negatively affected. With a home equity line of credit reverse mortgage, in contrast, so long as your income is sufficient to cover property taxes, upkeep, and homeowners’ insurance on the home, you would be able to use the proceeds of loan to eliminate both your first mortgage obligation and the credit card debt, vastly improving your monthly cash flow. Importantly, no monthly payments are ever required as long as loan terms are met.

Yes, a reverse mortgage, like your credit cards and like your existing “forward” mortgage, IS a form of borrowing. Yet, prudently handled (as you have apparently handled your finances up to this point in your lives), you may find it to be much more manageable form of debt.  

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

With retirement from full time employment planned for 2025 (when you will turn 65), you’re beginning to scrutinize your budget, estimating which expenses are likely to escalate (and at what estimated rate). In addition to holding a full time job, you run a part-time, independent landscaping/handyman business, which you plan to continue after retirement so long as health and strength permit. Through your employer, you have health insurance coverage (which can be continued at your own expense post-retirement) and an individually owned Long Term Care insurance policy. The premiums on the latter have twice escalated sharply, and you are concerned about future costs. 

On the positive side, as of last year, you own your home outright (despite multiple indications of interest by would-be buyers, you’ve decided to “retire in place”). As the sole owner and occupant of your home, you’ve kept it well-maintained, but a new roof and new driveway paving will become necessary within the next few years. While your car is paid for, you can foresee needing to replace it within the next couple of years; that, too, is a looming budgetary concern.  In addition, your home office equipment for the business will need replacing within the next few years (printer, scanner, desktop). One additional area of concern is a ten-year charitable commitment you have made that has six more years to go. 

Despite the sharp drop in the market value of some of your investments, you have resisted the impulse to pull out, understanding the value of “staying the course”. Assuming the economy recovers prior to your retirement, you believe that, with your pension and the income from independent gigs, you will be able to cover your own lifestyle needs until you qualify for Social Security benefits. The big unknowns are the need for major home repairs (despite being a seasoned handyman, you are no roofer or cement layer), replacing your current vehicle, and the likely rise in health and long term care insurance costs. At the start of your retirement budget planning process, you spoke with a banker about financing a line of credit mortgage on your home, but the recent rise in interest rates scared you away from that idea.  

To use your housing wealth as a resource to cover probable, but as yet unquantified future, expenses, a HECM reverse mortgage set up as a “line of credit” might prove very effective as a “budgetary resource”. Since you have no immediate need to finance the big home maintenance jobs, the office equipment replacement, or the car purchase, your reverse mortgage the line of credit can actually be growing, with the equity in your home functioning as a “buffer” asset.

Rather than merely lining up your resources in preparation for retirement, your housing wealth can be used to shore up your preparations against future budgetary strain.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

As a single gentleman at the “ripe old age” of 71, you’re still able to command a sizeable income, and God willing, hope to continue your very active lifestyle indefinitely. While you travel extensively, you’re proud of your home, which you’ve kept in good repair and which is fully paid for (but, which, your one adult daughter has frankly stated, she has no interest in inheriting…

Interestingly, you have never been part of an employer pension plan, but have contributed the maximum every year to a self-directed Roth IRA, and intend to make the maximum allowable contribution again this year and in coming years, hopefully being able to keep the money growing tax-free with no obligation to make withdrawals. The Roth IRA will make the perfect inheritance for your daughter, you believe, with the entire sum of all your deposits over the years, plus the earnings, transferring to her as named beneficiary. (Under the latest changes in the law, you understand, she will be forced to withdraw the money within ten years of your death, but that will generate no tax liability for her, since you’ve held the account for longer than five years.)

Since you’re already maxing out your annual Roth contributions, you might consider “enriching” your daughter’s inheritance in an additional way, using the equity in your home. Although setting up a reverse mortgage will entail some upfront costs, you would be using your housing wealth to establish a second source of growing wealth earmarked for your heirs. Unlike the investments in your Roth account, if you make no withdrawals, the value of your home equity will never fluctuate downward due to stock market volatility; instead, the unused portion of your equity will in fact, be increasing. grow. Of course,, you’ll continue to be responsible for property taxes, insurance, and maintenance costs, but you’re obviously used to keeping the home in tip top shape. Best of all, should your income drop and you feel the need to use some of the available funds, you can do that without tax liability, leaving the Roth IRA to continue to grow for the benefit of your daughter.

With the combination of the Roth IRA and a reverse mortgage, you’ll be building your daughter’s inheritance from both directions.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

With your third child now finished with college and all three seemingly firmly ensconced in the world of work, the two of you have begun to focus your attention on your own future financial security. In your early 40s with full-time careers, retirement is probably at least a couple of decades away. Up until now, your estate planning has been focused around guaranteeing that your daughter and sons would all be able to enter the professional workforce unencumbered by debt. You each had substantial term life insurance policies to be sure that plan was carried out no matter what. 

The emphasis moving forward is on maintaining your own financial independence for life, without you ever becoming a burden on your children. At this point, long term care insurance, you’ve realized, is more important than the life insurance, and you’ve begun exploring different policies. The costs are somewhat daunting, particularly since you have been offered a policy rider that increases the coverage to keep up with inflation. When you expressed concerns about keeping up with the premiums once you’ve both retired, you learned that some policies would allow you to achieve “paid up” status, which f course would increase the financial commitment substantially. A related aspect of your planning is your home, where you plan to remain in retirement. Your mortgage should be fully retired by that time, which would free up some dollars towards continuing to fund the long term care policies.

As you shift your attention away from helping your children towards your own future living needs and protection, you are right in realizing that your home is an asset that should be considered along with your retirement accounts. One possible course of action would be to set up your Long Term Care policies now (while you have greater probability of qualifying), but with longer “elimination periods” (meaning benefits might begin months following a claim rather than immediately), leaving off the “inflation riders”, thereby keeping the premium costs in a much more affordable range. Then, at your age 62, you can set up a reverse mortgage, using your housing wealth, on an as-needed basis, to fund any long term care needs that exceed the policies’ coverage.

In this now-and-later plan, you set long term care protection in place now, but allow the equity you’re building in your own home to replace the costly policy “riders” – later.

A reverse mortgage can replace riders on long term care insurance.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

A little over two years ago, you accepted a buyout offer from the company where you’d worked for thirty-one years. At the time, there seemed to be several alternate employment opportunities (in any event, you would have been let go in the downsizing). Unfortunately, none of those other offers materialized. You had remarried just prior to losing the job; even with the buyout sum, the careful plans the two of you had made for sharing expenses – and for  liquidating debt prior to retirement – became impossible to execute. Your husband, who is 64, plans to work up until his age 67. His position seems very secure, bringing in enough to cover basic expenses for both of you. In contrast you, at age 63, have despaired of replacing your income at anywhere near its former level. You’ve used up your settlement money and have gone through the bulk of your investment accounts, but have so far managed to avoid tapping into your own 401K or IRA. 

You are the sole owner of your home, and the plan was for you to continue to cover the mortgage payments, with the home fully paid for by the time you reach age 65. The regular upkeep and maintenance expenses have been largely covered by your husband. Your estate planning documents stipulate that, should you be the first to die, he can choose to remain in the home for the rest of his life, but then the property goes to your daughter. Because of your current job situation, you would not qualify for a second mortgage on the house, so spending down your retirement funds seems the only choice.

Tapping into the equity in your home equity is possible, whether you’re employed or not. Consider applying for a reverse mortgage rather than a second forward mortgage. Income requirements are minimal, since you will not be obligated to make monthly payments. The proceeds from the reverse mortgage loan would first go towards paying off the remaining first mortgage, this relieving you of the need to make mortgage payments.  Although you would be the only borrower, your husband, as an age-eligible non-borrowing spouse, would be able to continue living in the home should he survive you. Meanwhile, your estate plan could still name your daughter as heir to the home. 

She would have the choice of paying off the mortgage and keeping the home, or of selling it, retaining any excess proceeds. Meanwhile, if you are able to find employment and want to build back the home equity, you can choose to make mortgage payment to the extent you are able with the added benefit that any payment made against the reverse mortgage balance would also flow dollar for dollar into a line of credit guaranteed to grow at the same rate the mortgage balance is accruing interest.

When best-laid plans go awry, using your housing wealth can save the situation.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

It’s ironic, those recent headlines about forgiveness of student loans, since the two of you had agreed long ago to pay for your three children’s college education (and did just that). Post Bachelor’s degree, the concept was, each child would be responsible for his or her own support. Your general estate plan directed that any assets remaining after the second one of you dies, including the value of your home) would be equally divided among the kids. You didn’t expect to ever need your children’s support, and they, in turn, were not led to expect support from you during your lifetimes. In the past couple of years, however, several things have happened to make you consider deviating from that firm set of rules.

One of your grandchildren was severely injured in a traffic accident and is expected to require years of medical care and rehabilitation; a personal injury lawsuit has been filed, but any compensation is months or years away. Meanwhile, following a very brave struggle, your daughter and son-in-law were forced out of business in a prime location and are starting to rebuild. Knowing your general outlook, neither of these families has appealed to you for help, but you simply cannot be comfortable withholding support for these two families.

While your own situation is very stable, you want to proceed with caution.  The mortgage on your recently remodeled home has been completely paid off, so one option might be a home equity loan. Your living expenses are largely covered by two pensions and by social security; you rarely draw upon your investment assets, most of which are in tax-sheltered retirement account (so that only the after-tax net proceeds would be available to help your children with a meaningful lump sum gift. (you would consult your estate planning attorney about making loans that would be forgiven upon the second death, but first you need to decide what funds to use without negatively affecting your own lifestyle.).

You’ve mentioned using your housing wealth to provide the needed help for family members.  Rather than taking out a home equity loan, however, you might consider using that “housing wealth” by taking out a reverse mortgage, avoiding both the need to make mortgage payment or the generation of taxable income. You could adjust your estate plan to accommodate the “early legacy” you’d be giving to two of your three children. Most important, you’d be helping these two families when your help is truly needed, yet doing that with the least affect on your own lifestyle.

Yes, it’s ironic, but sometimes, reversals in fortune can force us to reverse our thinking.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

After your husband died several years ago, you had been strongly considering selling your home. After retiring from your position as executive assistant, you contemplated living in a retirement community. Since then, you’ve changed the direction of your planning. With your mother intending to move back to the Midwest, you’re considering a different plan, namely building an addition onto your existing home to create a separate apartment for her. Fortunately, there is sufficient space on the property to accommodate such an addition, with a separate entrance for her, yet with access to the downstairs of your own living quarters. You’ve spent the last six months getting proposals from builders, even researching the zoning laws.

Your mom has offered to help pay for the renovations, but, while you will allow her to contribute to the upkeep of the home, you know her finances are not set up for a large lump sum commitment. You’ve been considering different options for financing the structural addition and the furnishing of the apartment, perhaps cashing in some investments and taking out a second mortgage (your first mortgage will be paid off next year).

You’re certainly not alone in exploring multi-generational living. According to the Pew Research Center, 20% of the US population shares their homes with another generation. But, instead of a second mortgage, you might consider tapping into your home equity in a different way, using a reverse mortgage. Using the proceeds of the loan, you might not need to cash in investment assets, especially since Mom will be helping with your everyday household expenses going forward. With an FHA-insured HECM Adjustable Rate Loan line of credit, you’ll be able to draw the amount needed to finance each stage of the work. You’ll continue to pay real estate taxes and insurance (on the newly appraised value of the home, of course), but there will no longer be a monthly payment due.

A reverse mortgage might prove to be the key for creating the perfect new home for Mom.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

With summer swiftly waning, you’re beginning to think about the winter holidays.  Unfortunately, with inflation having noticeably strained your budget, you have concerns around your traditional role as “Uncle Santa”. Each Christmas for the past ten or more years, you’ve made Christmas gifts to each of your nieces and nephews in the form of a contribution to a college fund. While two nephews have graduated, you’re carrying on the same gifting tradition with your two grand-nieces. It will be a squeeze, but you imagine you can keep the gift-giving going through 2022. Still, you’re dreading having the overly intrusive conversation about the state of your finances that will inevitably follow your news. The young ones, along with their parents, have come to expect those gifts as a natural part of the family holiday rituals. In reality, meanwhile, you’ve managed your post-retirement “finances” very responsibly. Your home is mortgage-free, your car paid for, and there is no credit card debt to speak of. The “squeeze” you’re experiencing have to do with escalating insurance premiums (including both auto and long term care insurance), plus the rise in gasoline and food costs.

One solution might be to use your “housing wealth” as a resource, arranging for a reverse mortgage on your home. There will be no mandatory mortgage payments, but of course you’ll be responsible for property taxes, homeowner’s insurance, and home maintenance costs, just as you are now. Using that reverse mortgage line of credit, you’ll be able to make those annual Christmas gifts. In a way, you’ll be giving a “gift” to yourself to be able to see your nieces and nephews avoid crippling college debt. Meanwhile, should your car need replacing at some future date, you’ll have ready access to the funds needed.

A reverse mortgage might be Santa’s gift to you – a gift that lets you keep on giving.

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894