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#137: Using a reverse mortgage can be used to hedge against property devaluation


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.