Having survived some serious post-COVID health challenges, the two of you are happy to be back to Plan A, involving the major home indoor and outdoor redesign you’d originally hoped to do right after retiring. With the newest estimates from contractors totaling some $120,000, you’ll be forced to both sell off some portfolio assets and apply for a home equity line of credit in order to fund the work.
Ongoing living costs have been comfortably handled through your pension, Social Security for each of you, and some of your wife’s special consulting gigs. You’d established a systematic withdrawal plan out of a jointly owned investment account, but were forced to take several large withdrawals to cover certain non-covered rehab therapies. While that joint portfolio has done very well, you’re reluctant to apply further strains on its value.
Ironically, the big dilemma inherent in the decision to move forward with the renovation concerns a block of stock your wife inherited from her parents, which has appreciated to an almost astounding extent. (In order to “net” $120,000, your accountant has estimated, you’d need to sell a chunk of those inherited shares close to double that amount!) In fact, one big goal of your estate planning was to have your four children inherit that stock some day with no need to pay capital gains.
Redesign and Renovation Plan B need not involve straining the jointly held account, incurring a monthly mortgage obligation,* or selling appreciated stock. Consider accessing your housing wealth, but through a reverse mortgage loan line of credit, to be accessed as the renovations. progress. There will be upfront costs of establishing that line of credit, but the unused portion of the equity will be credited with the same rate of growth as the interest being charged on the borrowed funds.
Avoiding sales of the stock your wife inherited will preserve the possibility your children benefiting from the “step-up” in basis. The housing wealth you have now can help your children benefit later.
*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.orgEqual Housing Lender