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#199: Using a reverse mortgage as a deferred annuity

USE HOME EQUITY NOW TO GROW FUTURE INCOME STREAM

You consider yourself (your spouse generally agrees with this assessment) a very reasoned person when it comes to handling financial decisions. Now retired and in your early 70s, you’ve been witness, over the years, to some of the best and worst times in the stock market. While you continue to believe in maintaining a steady course and sticking to your long term plan, the extremely volatile political climate of today, along with predictions of a dramatic drop in equity markets, are starting to spook you a bit.

You have four regular sources of income: Social Security (for both of you), your wife’s teacher’s pension, regular withdrawals from your IRA Rollover account, and a quarterly distribution from a fixed annuity. Meanwhile, your jointly owned investment account serves as a backup emergency fund. Your home is fully paid for and well-maintained (although there has been a sharp increase in repair and maintenance costs) and the plan is to spend the rest of your lives there. (You’ve watched the market value of homes in your neighborhood more than quadruple – is this a bubble doomed to burst, you wonder?)

Regardless of the future direction of either the investment or real estate markets, one planning tactic you might consider is using home equity via a reverse mortgage line of credit to create a kind of deferred fixed annuity. You’re already familiar with the concept of an annuity, which pays a guaranteed income based on your joint life expectancy at the onset of the payout. By taking out a reverse mortgage on your home (doing it now, while the value of your home, as you pointed out, is at a high level), you would be arranging for a standby line of credit, “turning on” an income stream at some point in the future. 

Between now and the time you chose to turn on the annuity payout, the unused portion of your equity will be growing, creating a higher annuity payout when you’re ready to take it. Best of all, that guaranteed “growth” will happen independent of any overall changes in the residential real estate market.

An FHA-insured reverse mortgage equity line of credit is a way to use housing wealth today to structure fixed annuity income for tomorrow.

https://mutualreverse.com/david-garrison

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).

Please consult a tax advisor. If your heirs want to keep the home after your death, they will have to repay either the full loan balance or 95% of the home’s appraised value, whichever is less. 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: www.nmlsconsumeraccess.org

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