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

Given the state of the economy, you can’t help thinking you should have waited before retiring. You’d done quite a bit of careful planning in terms of arranging systematic withdrawals out of your investment accounts, but with the recent sharp increase in everyday costs, you’re afraid the system will lead to running out of money. While you’re pleased with your (thankfully) paid-off and newly remodeled home, the utility costs have escalated along with everything else. 

Your investments have suffered only minor – and only recent) declines, but you’re concerned that growth in value will be, at best, modest over the next several years. Withdrawing more than the originally planned monthly amount seems risky; even the originally planned amount would put stress on the portfolio value.  Meanwhile, after decades of maintaining absolutely zero credit card debt, you’ve been forced to allow some balances to carry over from previous months’ spending posing yet another reason for concern about the predicted near-term rise in interest rates. 

A reverse mortgage on your home can help support your monthly income needs, either by supplementing your portfolio withdrawals or, at least in the near-term, replacing them entirely. Unlike the credit card debt you mention, you will pay no interest on un-borrowed funds in your reverse mortgage line of credit, and costs will be significantly lower than those on credit card borrowing. What’s more, unlike a regular line of credit at a bank, with a reverse mortgage line of credit, as long as you have a remaining balance, your line of credit can never be frozen or closed. In fact, the unused portion of your credit line grows, using the same rate at which the loan accrues interest! 

Thankfully, as you said, you’ve been able to accumulate housing wealth.  Now might be the time to let that housing wealth do the job of supplementing, or even  “standing in” for your portfolio draws. 

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

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

You’ve been toying with the idea for years, but all that ice and snow last month in Indiana “clinched the deal” for you. Widowed and in your mid-seventies, you want to remain a resident of Indiana, but own a small place in the sun where you can spend the winter months. You have cousins in New Mexico, and will probably look there first.

You have the resources to make a substantial down payment on a second house or condo, but in order to totally fund a purchase, you’d need to use retirement plan assets, which you are reluctant to do.

You might consider a HECM refinance, which is a type of reverse mortgage loan where you use the equity in this home to purchase a second residence. Your Indiana house would remain your primary place to live, but you’d be tapping the equity you’ve built here to fund that “place in the sun.” Depending on the numbers, you might even be able to totally finance the purchase of the New Mexico home.

Of course, you’ll want to be sure your income is enough to cover property taxes, insurance, and other costs of home ownership in both places.  Assuming that’s the case, a reverse mortgage can be an excellent way to “feather a nest” in the sun.

https://mutualreverse.com/david-garrison

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

While your original plan was to move to a smaller home with fewer outdoor grounds to maintain, no stairs, and senior-friendly baths, you’ve simply given up. The bidding wars and the incredible “need for speed” in the buying process for today’s real estate have simply scared you away.  Instead, you’re now resolved to remodel the kitchen and bath in your present home. In later years, if needed, you’ll install a stair lift. 

Financially, you feel prepared for the initial costs of the renovations (in the process of all that home shopping, you cashed in several investment accounts and have been stockpiling cash reserves). Now that you won’t be selling the home, however, you will need to borrow money to finance the later stages of the work.

What you’ve been discovering, much to your dismay, is that all those supply chain issues and labor shortages you’ve been hearing about on the news are very real. You’re being told by contractors that you must be prepared for long delays and rising costs (even quotes might not be “locked in”, you’ve been warned). 

Now that you’ve made the decision to “age in your own place”, a reverse mortgage line of credit might be a good way to finance those irregularly-timed renovation expenses, using the equity you’ve built up in your home. Set up as a line of credit, your reverse mortgage will allow you to draw from the equity as needed to pay for each stage of the renovation.  Meanwhile, the unused portion will be growing at the same rate the mortgage balance is increasing.

Your reverse mortgage home equity line of credit equity will be there to help you ride out the ups and downs of supply chain and labor shortages, while you redesign your surroundings for “staying put.”

https://mutualreverse.com/david-garrison

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

March 1st, 2022

When the two of you retired just seven years ago, you took comfort in knowing you were each covered by a Long-Term Care insurance policy with lifetime benefits. Since then, there have been two premium increases, which you have been able to handle. Luckily, the growth in your investments has so far allowed you to keep up with even the steep rise in grocery, heating and gasoline costs.  

With all the talk about aging in place, you are undecided on the subject.  You enjoy your home (now fully paid for), and certainly hope to spend the rest of your lives there. However, should healthcare needs dictate, either of you could be forced to use a care facility, since neither of your LTC policies includes home care. 

Of immediate concern is a recent notice you’ve received from the insurance company describing a third premium increase. The letter offers you several alternatives: maintain your current benefit levels with a 20% increase in premium, keep paying your current premium but accept a longer “waiting period”, or reduce premiums while settling for three to five years of benefit payouts as opposed to lifetime benefits.

A reverse mortgage on your home might provide an answer, even if you don’t need to tap the equity in your home right away. Your mortgage can be set up as a growing line of credit, becoming your safety net against any future rises in LTC insurance premium costs. 

You may be “undecided” on aging in place, but a reverse mortgage will allow you enjoy your home together and put that decision on indefinite hold.

https://mutualreverse.com/david-garrison

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

February 24th, 2022

Five years ago, when your father fell ill, you moved back to Indiana from Tennessee to help your mother care for him; after his passing last year, you decided to stay. Your company has arranged for you to work remotely 75% of the time, with your own retirement planned for the fall of 2025. 

In the months before your dad’s health took that dramatic turn for the worse, your parents had been in the initial stages of exploring a reverse mortgage. Their hope was to spend the rest of their lives in that house. Each of your parents had a long term care insurance policy (in fact this insurance helped finance a lot of the at-home nursing costs).

Now that you have made the decision to stay and live with her, your mother intends to move forward with the reverse mortgage, using some of the equity to remodel the home, creating a “suite” for you with an office, a bedroom and bath.  Mom does not anticipate needing your help with household expenses other than groceries; with what your dad left her, she says she is fine financially.

If this has not already happened, it would be a good idea for you to visit with an estate planning attorney to update your mother’s power of attorney and other documents. You are just now learning about the reverse mortgage and have some concerns about what will happen with the home at the end of your mother’s life.

As your mother’s heir, you will be responsible for satisfying the debt after her death. What’s so reassuring is that if the value of the home for some reason should prove insufficient to satisfy the debt, any deficiency would be covered out of the FHA mortgage insurance fund. If you choose not to sell the home, (depending on the remaining equity and your being over age 62 at the time), you might choose to apply for a reverse mortgage of your own at the time as a way to pay off Mom’s reverse mortgage.

Sounds like your mom is moving ahead with her life, It also sounds like she’s lucky to have a daughter like you!

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

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

February 14th, 2022

Sinatra was right, the two of you agree, as, in your early seventies, you plan your wedding. You’re both retired from professional careers; each of you has managed pretty well financially on a combination of Social Security, pension, and investment income.

Although your courtship began almost five years ago, you’ve recently decided to tie the knot, with a plan to maintain the finances using a his/hers/ours system, with each of you contributing monthly to a joint “pot” for everyday expenses and travel, and each maintaining separate ownership and control of your investment accounts.

One concern is how to combine households – you each own a paid-for home that has appreciated significantly in value. Selling either would generate a large capital gains tax, you fear, and you would also need to work out the best way to share the costs of remodeling the house in which you choose to reside. Looking ahead, you want assurance that when the first of you dies, the survivor can remain in the home for the rest of his or her life. At the same time, you want to treat both sets of adult children fairly inheritance-wise.

A tax advisor can offer guidance; an estate planning attorney can draft documents advice tailored to your situation. Generally speaking, when one of your two homes is sold, the owner should owe no capital gains tax on the first $250,000 of profit. One strategy might be to take out a reverse mortgage on the home in which you decide to live, tapping the equity to fund the renovations. If the two of you are married by the time the owner applies for the reverse mortgage, the non-owner survivor would have the right to remain in the home after the borrower dies.

While combining two households and two lives is hardly without complexity, as Frank Sinatra would agree, both love and home ownership can be lovelier the second time around.

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

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

February 10th, 2022

The two of you have always agreed on a conservative approach to investing, more or less following the traditional 60/40 mix of stocks and fixed dollar investments. Conservative about money matters in general, you have zero revolving debt. In fact, having decided to remain in your home, you are mere months away from paying off the mortgage. As recent retirees, you have updated your insurance (including long-term care) and have received your first social security checks, which, combined with your respective pension income, should be sufficient to cover your lifestyle needs for at least the near term without tapping any of the portfolio assets. 

While in general, you’re confident that you’ve planned well for retirement, you are concerned about two current trends – the big jump in everyday costs of living, and the rise in interest rates (with the Fed talking of increases to come). You’re worried about your bond holdings, understanding that when interest rates increase, that will force bond prices down. You realize that the yields on other types of fixed dollar investments such as CDs and fixed annuities will do a poor job at keeping up with inflation. In contrast, your stocks and stock funds (not withstanding some recent drops in value) have appreciated beyond your wildest expectations, but you don’t want total exposure to equities. You’ve been reading predictions from different “gurus” and are in a quandary about next steps. 

A reverse mortgage on your home might provide a long-term solution, allowing you to earn interest on the un-borrowed portion of the Home Equity Conversion Mortgage available line of credit. That resource could take the place of your “fixed-dollar” portfolio allocation, with the credit line growing at the same rate at which the loan interest would accrue if you tapped the line of credit. And, unlike the bonds in your portfolio, rising interest rates will serve as a positive, helping to grow your line of credit without a concurrent loss of principal value.

In a sense, while still following the 60/40 model, you could use a reverse mortgage line of credit to replace the 40%!

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

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

January 25th, 2022

As a financial advisor, you’ve prided yourself on working in cooperation with your clients’ other advisors (CPA, estate planning attorney, business broker, realtor, insurance agent), even helping clients assemble those advisory teams. It is not unusual for you to host and even “emcee” such advisory team meetings for different clients.

Up until recently, reverse mortgages have not been under discussion at any of these team meetings. For one, your clients have mostly been too young to qualify for reverse mortgage funding. Now that several have introduced their parents to your practice, the topic of housing assets as part of wealth planning has become more relevant, with questions arising about the pros and cons of different types of reverse mortgages.

While there are ways to use a reverse mortgage to help clients achieve a variety of financial goals, one signal that this topic should be included in the “agenda” is clients expressing a strong desire to “age in place”. Since reverse mortgage debt does not need to be repaid until the owners sell, move, or die, clients can plan to spend their retirement years in familiar surroundings.

Since you are the financial advisor on the “team”, the one aspect of a Home Equity Conversion Mortgage most relevant to the services you provide your clients is the financial flexibility they will have to preserve and grow their investment assets. After all, your biggest challenge as a financial advisor consists of helping retirees maintain their desired standard of living without depleting their assets. But, as you’re all too aware, significant market losses in the early years of retirement can dramatically shorten the longevity of a portfolio.

When draws from a reverse mortgage line of credit are substituted for portfolio draws in years following investment market downturns, the longevity of the clients’ investment assets can be restored and even enhanced.

Housing wealth can enable a long term wealth management strategy..

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

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

January 24th, 2022

You never thought this would happen, but in your late sixties, the two of you are being given a second chance to practice your parenting skills. Your daughter, a widow, is a traveling healthcare “auditor” and is out of town a good portion of the time. In order to help supervise the two teen children, you decided last year to let all three of them move in with you. As retired educators, the two of you are well-positioned to supervise the grandkid’s studies (including remote learning when necessary), and to chauffeur them to their various activities (neither is yet of driving age). Your daughter has the peace of mind of knowing her kids are well taken care of during her absences.

Fortunately, five years ago you did an extensive remodel of your home, creating a ground floor master bedroom and bath, but still maintaining three upstairs rooms. Your plan was to “age in place”; now you’re “parenting in place”! From a financial standpoint, nothing has really  changed for you, as your daughter is well able to support her own expenses and those of the children; in fact, she has insisted on contributing to the monthly household expenses.

Within the next five to six years, both of the grandchildren will be entering college, and you would like to find a way to help fund those costs. You had used a home equity line of credit to fund the big remodel, and have that loan almost two thirds repaid. Since mandatory withdrawals from your retirement plans will need to start just about when the older grandchild is going to need tuition help, you’re hoping to be able to at least make a dent in the college costs.

As an alternate approach to your situation, consider using your own housing wealth to help with the grandchildren’s education costs. Since your plan always was to remain in your home, a reverse mortgage line of credit can provide the source of funds to help pay college expenses for the grandchildren precisely when most needed. Since reverse mortgage payments are considered loan proceeds rather than income, they are not taxable. You can choose to make each withdrawal precisely when each grandchild is faced with a specific and immediate college expense.

Your housing wealth can help you help those grandkids!

https://mutualreverse.com/david-garrison