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#179 Using a reverse mortgage to rebalance investment “diet”


As recent retirees who only recently attended an intense three-day investment seminar on portfolio allocation, you two are feeling yourselves in somewhat of a quandary. Not only does your combined portfolio consist of almost 85% equity (a category the speaker dubbed “owner investments”), but the greater portion of that equity consists of the stock of the company where you were both employed up until 2021. The happy news, of course, is that the growth in that stock has been phenomenal. With interest rates possibly going to decrease, changing to some “loaner” investments might be a good idea, you’ve concluded, but you are still reluctant to divest yourselves of the stock that has been so much a part of your lives.

In other aspects of your planning, you feel comfortable with your preparations, having filled out the  5 Wishes forms for your estate planning and making sure your home is in good shape, including a new hot water system and roof. The house is owned jointly and fully paid for.  

It appears you’ve taken responsibility for planning your affairs as you begin the retirement phase of your lives. Without in any way offering investment allocation or legal advice, I might suggest that, as you make asset allocation decisions about “owner” and “loaner” investments, that you include the equity in your residence to be part of the planning.Right now your “housing wealth” represents an even greater allocation to the “owner” side of the “investment pie”. Rather than rebalancing your asset allocation by selling your existing stock holdings and purchasing “loaner investments” such as bonds, you might set up a non-recourse reverse mortgage loan on your home, which would represent a “loaner investment” in and of itself.  Not only will there be no monthly mortgage payments due, but any unused portion of your equity will be credited with growth at the same rate as the interest being charged on the borrowed funds, “adding to” the “loaner” portion of your overall asset allocation.

In short, a reverse mortgage can help you use an “owned” asset to diversify into “loaner” investments.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: Equal Housing Lender