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

Like a number of your friends and former co-workers, you’ve been downsized from what you had considered a stable career. At age 57, finding a new position in your field has so far proven fruitless, and until the pandemic has become past tense, you don’t see much hope of replacing your income. Your spouse is 62 and still working, but the one income is hardly enough to support your lifestyle needs.

At this point, you have already gone through a good portion of your own savings and investment accounts, and the bulk of your remaining assets is tied up in your IRA and in your company 401K account. Your wife would be allowed to take a loan from her own 401K, you’ve learned, and one of the new laws would allow her up to three years to pay the money back without tax. She is very reluctant to consider that step, and frankly neither of you likes to either increase debt or create any extra tax burden. You’ve been informed that, while normally you need to be 59 ½ years old to tap your own IRA and/or 401k without a 10% penalty, the Rule of 55 allows penalty-free withdrawals sooner in cases like yours. As yet another option, you have been considering taking a home equity line of credit against your home, but that, too, involves increasing debt during a time of uncertainty

As homeowners, since one of you is over the age of 62, you may be able to qualify for a reverse mortgage, which would allow you to convert your home equity into cash to pay for expenses while you explore options for either part time or full time employment. With a reverse mortgage, unlike a home equity loan, you will not need to make regular installment payments to cover the principal and interest. Instead, with your reverse mortgage set up as a HELOC or line of credit, you will be able to withdraw money as needed, but stop withdrawals and even start repayments if and when you go back to work. Meanwhile, your 401K and IRA funds can continue to grow tax-deferred.

Not intended as tax advice. Please consult a tax specialist.

https://mutualreverse.com/david-garrison

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

Your plan had been to work at least until your so-called Social Security “normal retirement age” of 67, but here you are, barely 62, victim of a pandemic-based downsizing. You have been applying for jobs and will certainly find a way to earn some money, but there is little prospect of continuing your former standard of living. You’ve considered taking early Social Security to avoid the cash crunch, but learned, much to your horror, that the reduction in your monthly benefit would be in the four figure range!

Yes, you have a modest investment account, but your 401k plan was seriously eroded in the course of your divorce. What’s more, you’ve learned, now that you’re no longer part of the company, you cannot tap that 401k through a loan. Taking stock, you realize that fortunately, in the divorce, you were awarded full ownership of your home, which has only a partial mortgage balance remaining. And yes, you’re expecting an inheritance at some point in the not-too-distantfuture, but need to find ways to bridge the financial gaps now. A home equity loan is a possibility, but, although your credit record has been good, without being able to demonstrate a reliable current income source, you’re not sure you’d qualify. Is early Social Security the best choice after all, you wonder?

An option to consider is a reverse mortgage, using the equity in your home as a resource. Unlike the second mortgage you’ve considered (where you’d need to make regular payments), a reverse mortgage would give you a source of income that could help cover the income shortfall until you qualify for your full social security benefit. With a reverse mortgage, you will not need to make regular installment payments to the lender, because the equity in your home will serve as collateral for the loan. Depending on your success in finding work, you may stop those withdrawals and even start repayments. The advantage is that, so long as you keep up your property taxes, insurance, and regular maintenance of the home, you will not be obligated to make payments. Your 401K can continue to grow tax-deferred, and IRA funds can continue to grow tax-deferred, and your Social Security can grow to their “normal” size.

Not intended as tax advice. Please consult a tax specialist.

https://mutualreverse.com/david-garrison

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

With all the buzz about the incredibly competitive market for homes in Indiana, you’ve been wondering how long the situation can last. Several homes in your neighborhood have soldwell above asking price, within mere days of being put on the market. Despite the temptation to profit from your own home’s appreciation, you’ve made the decision to stay put.

Still, you’re concerned – could a negative turn in the real estate market derail your retirement plans? With residential property values at an all-time high and interest rates at an all-time low, is the bubble about to burst, negatively affecting your own financial future? Some
what reassuring is the fact that in one short year, your mortgage will have been paid off.

As a single woman in your late 60’s, you are now focused on finding ways to generate a fixed monthly income to supplement your social security benefit and pension as you phase out your part time employment. Ideally, you can continue to maintain your six figure stock and mutual fund portfolio, reinvesting dividends, and allowing those equity holdings to grow. You might spend some of that money in your later years, but have arranged to have any remaining portfolio assets serve as an inheritance to your grand nieces and nephews.

Converting your home equity into spendable fund through a reverse mortgage can help in two areas of your concern. First, through a HECM line of credit, you can generate a steady, tax-free, lifelong monthly income

At the same time, should your fear of the “bubble” bursting in the real estate market be come true at some point in the future, you would still be able to continue receiving a monthly income for as long as you remain in the home. In fact, should a time come when you can no longer stay in the home, even if the loan balance exceeds the property value at the time, neither you nor your estate would be liable for the deficiency.

Should a more positive scenario play itself out, on the other hand, with your home appreciating to a value that exceeds your mortgage loan, you can choose to refinance, increasing your monthly income.

A reverse mortgage can allow you to lock in home value on a “high note!

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

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

After a close friend (like yourself in her mid seventies) confided that she had taken out a reverse mortgage on her home, you decided to explore that possibility for your own home, reading whatever materials you could get your hands on about that type of loan. You like the idea of having a ready source of funds for any large and unexpected medical and dental costs that might arise in later years (which was precisely your friend’s motivation for applying for a reverse mortgage). Your biggest hesitation in moving forward comes from the fact that you’ve worked hard to become – and stay – debt free, and a reverse mortgage would mean taking on a new, hefty debt obligation.

Reverse mortgages are about converting an otherwise illiquid asset (if not your largest, your home is undoubtedly one of your largest assets) into one that addresses a need. Ask yourself – what alternatives are available to you to help defray future medical and dental bills? To what extent would those costs be covered by insurance, including Medicare, supplemental health insurance, and Long term Care insurance? Absent tapping into the equity in your home, would you be able to fund these costs without liquidating all your savings/investments – and without borrowing money at that time? With or without a reverse mortgage, do you expect to be able to cover all property taxes, homeowner’s insurance,and maintenance on the home without ever incurring any debt?

There are estate planning considerations as well that must be part of your decision; your friend’s situation may well be different from your own. Is it your intent to “age in place” in this very home? Do you want this home to be inherited by a child who might want to live there?

Yes, a reverse mortgage is definitely a debt, and all debt needs to be carefully considered – and carefully managed. It’s reassuring to know that Home Equity Conversion Mortgages or HECMs, unlike other forms of debt, are non-recourse loans, which means both you and your hairs are protected from ever being “upside down”, owing an amount greater than the value of the home itself.

As you have undoubted learned in your readings on the subject, reverse mortgages were created around thirty years ago specifically to allow older Americans like yourself a way to meet and manage current and future financial contingencies.

https://mutualreverse.com/david-garrison

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

Four years in, you continue to reap the benefits of the saving and planning you’d done in preparation for retirement. With travel restrictions finally beginning to ease, you’ve decided to plan some cross-country family visits and at least one jaunt abroad. To raise the extra discretionary cash, you’ve been exploring the possibility of freeing up equity in your home by applying for a reverse mortgage. You like the idea of having a line of credit to draw on without needing to make decisions as to which investment account to liquidate each time you finance a trip (or concern yourself with generating capital gains tax).

With both your children self sufficient, you don’t anticipate either needing your financial help. On the other hand, as a parent, you’d never want to impose a financial burden on your children. Since you’re hoping to spend the rest of your life in this home, using the equity you’ve built up sounds like a solid plan. But then, an article you read on reverse mortgage loans seemed to imply that, as the interest on a reverse mortgage loan builds over the years, you could end up with your children having to repay your loan for much more than the house itself is worth.

HECMs (Home Equity Conversion Mortgages) were created specifically to allow for retirees like yourself to tap into the equity of their homes to help supplement and enrich their finances. Neither you nor your heirs can be “saddled with debt” by an FHA-approved reverse mortgage, because, at the point at which you depart the home or upon your death, no one can be held liable for any more money than the appraised value of the home at the time. Yes, even if the amount you’ve drawn out of the reverse mortgage line of credit exceeds the value of the home, your children can choose to give back the house to the lender, or keep it by paying 95% of the mortgage balance!

Far from saddling heirs with debt, a reverse mortgage is all about using your own assets to enhance your own retirement lifestyle.

Not intended as tax advice. Please consult a tax specialist

https://mutualreverse.com/david-garrison

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

The events of 2020 – in terms of both the pandemic and the economy – have caused you to re-examine several of the income decisions you’d made upon your retirement four years earlier. For one thing, some of your income from part time assignments was negatively impacted, forcing you to take withdrawals from savings and investment accounts you’d thought could remain untapped for at least five more years. And, while stock market growth has worked in your favor, you are feeling less secure going forward. You’ve been exploring possibilities for refinancing your home as a way to feel more secure about your own financial future.

TV ads about reverse mortgages led you to consider that path for yourself. Widowed more than a decade ago, you have no plans to remarry. With a broad circle of friends and favorite cultural activities nearby, there is one aspect of your planning that has not changed – you intend to make every effort to remain in your home. The house itself is well-maintained and even professionally “updated” in terms of décor.

Together with a friend, you attended a couple of online seminars on ways to “utilize housing wealth” in retirement. Initially, the aspect of reverse mortgages you found most appealing, given your own situation, was a ”line of credit” feature delivering a monthly income. While you can already see your supplemental part time income improving this year over last, you would like the security of not needing to tap savings or investments.

The idea of having a regular monthly “supplement” was very appealing to you – that is, until an acquaintance disparaged the idea, comparing a reverse mortgage line of credit payment to the childhood game of Musical Chairs. “When the music stops,” this gentleman warned, “somebody is not going to have a chair.” What he meant, he explained that a reverse mortgage allows you to tap into a percentage of the value of your home, and when you reach that limit, the money stops suddenly.

Some mythbusting is definitely needed here. If you use the reverse mortgage to set up a line of credit, it is true that once the entire benefit is used up, no further draws will be permitted. At that point, you would have the choice of refinancing to take advantage of any appreciation in value that has taken place. If, on the other hand, you arrange to take the benefit in the form of a lifetime tenure payment, the “music” does not stop, regardless of what happens to the value of the home

https://mutualreverse.com/david-garrison

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

As a couple, your careful savings habits leading up to your retirement a year and a half ago have stood you in good stead. Happily, you’ve had sufficient income flow to satisfy your needs without cutting back on spending, and your withdrawals haven’t impacted the satisfying market value increase in your investment accounts.

On the negative side, in the course of preparing your taxes last month, you realized that a good portion of your investment portfolio resides in tax deferred accounts. What that means is that almost all of your regular income is fully taxable. To make matters worse, (an effect that is somehow just now coming to your attention) as a couple, you are what Social Security considers “higher-income beneficiaries”. That means, you now understand, you are each paying more for Medicare Part B. Worse, you’re paying tax on a large portion of your respective Social Security benefits.

Related to all this is a second aspect of your carefully thought-out plan. As the second of you turns 68 (which will happen yet this calendar year) you are planning to take out a reverse mortgage on your home. You envision using the freed-up equity to pay for, over the next few years, a total redesign and remodel of the property (without needing to cut back on your lifestyle expenditures to subsidize these costs). Neither of your two children is interested in ever living in the home, you’ve reasoned, and your desire is to not only beautify and modernize your surroundings, but ensure that it can accommodate your needs as you age into your seventies and beyond./span>

In coordinating the various aspects of your planning, you now realize that tax planning needs to assume more importance. The good news is that when you use the line of credit provided by your reverse mortgage, the money you receive is not taxable and generally generally won’t affect your Social Security or Medicare benefits. Your tax advisor can help work out the details, but a plan to explore would involve taking regular supplemental income out of the reverse mortgage line of credit, deferring (or at least reducing) withdrawals from your tax-deferred investment accounts.

Your reverse mortgage might actually help “reverse” the tax burden on your Medicare and Social Security benefits!

*A reverse mortgage may affect benefits from or eligibility for some government programs such as Supplemental Security Income and Medicaid.

https://mutualreverse.com/david-garrison

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

You’ve been helping people manage their financial decisions for decades. Many of your clients are now in their sixties and seventies, and, needless to say, your discussions with them are focused around different issues from those you talked about ten and twenty years ago. Today, In addition to choosing, monitoring, and rebalancing their investments, your conversations are likely to include health costs, charitable gifts, and estate planning.

Partially due to increased television spots on the subject, you’re beginning to receive serious inquiries about reverse mortgages, and have begun to “study up” on the topic. While you have no intention of promoting any mortgage product, you want to continue offering comprehensive advice relevant to the changing needs of your clients and they enter and progress through their retirement years. For the majority of them, you realize, a significant portion of their wealth is in the form of home equity.

When raising the subject of reverse mortgages with several colleagues from different firms, however, you were taken aback to find a lack of knowledge and, in many cases, a negative opinion. Several labeled reverse mortgages as a very “expensive” option, referring to upfront fees, but were unable to provide you with information about either those fees or the various ways in which housing wealth might solve specific problems clients face. While you want to avoid going deep in the weeds discussing a product in which you have no specialized training, you want to offer answers to client who trust you to follow up on their inquiries and explore solutions to issues they face.

When you as a financial advisor see something in client’s situations that is draining cash flow and you believe a reverse mortgage might serve as a tool, you should certainly recommend they speak with an experienced mortgage broker. Meanwhile, the more you continue to learn about the product and about the different ways to use it, the more targeted and appropriate your advice can be.

* The Financial Planning Association (FPA®) is working on a plan to educate financial planners on the opportunities that reverse mortgages may present as part of a comprehensive financial plan.

https://mutualreverse.com/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

At 73 and 72 years old, you’re juggling a set of decisions that make feel both fortunate and frustrated. The outdoor and interior renovations you’ve planned for your home over the coming fall and winter season are going to cost approximately $75,000; the plan is to take out a home equity line of credit to cover those costs. Your son has agreed to oversee the remodel while the two of you spend nearly half a year vacationing on the West Coast.

You’d like to have an extra $3,000 a month in income over that four to five month period of time. Other than the regular pension and social security income you each have coming in, you’ve established a systematic withdrawal plan out of your jointly owned investment accounts; increasing the draw, you fear, might affect a drain on the portfolio value.

The big dilemma? Your largest single investment holding, which you bought with $15,000 twenty years ago, is now worth more than $700,000. Selling that stock will result in a very unwelcome capital gains tax burden. In fact, part of your estate plan includes having your two children inherit that stock with no need to pay capital gains.

Rather than taking out the second mortgage on your home, consider accessing your housing wealth in a different way. A reverse mortgage on your $600,000 home might enable you to take a cash lump sum, both financing the renovations and generating the additional monthly income during the time you are away from home. Even after those cash withdrawals, there would remain a growing line of credit accessible as needed. There will be upfront costs of establishing the Home Equity Line of Credit, but those will prove small in comparison to the benefit of avoiding – and helping your children later avoid – tax liability on the capital gain.

https://mutualreverse.com/david-garrison