Skip to content

#106 Using a reverse mortgage to manage rising expense


October 11th, 2022

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