PREPARING RESOURCES NOW FOR SPENDABILITY LATER
While you’re not planning to sell your home, having decided years ago that aging in place would be the best course of action, you had rejoiced in the fact that, over the past few years, the market value of your home had increased substantially. In fact, using a home equity line of credit (now three months away from being completely paid off), you were able to finance new HVAC, replace the roof, and create a ground-floor bed and bath.
A divorcee now entering your seventies, you’ve been able to generate part time income to supplement a small pension and social security, and, until now, you’ve avoided taking withdrawals from your individual investment account. While you realize you’ll need to take IRA withdrawals in a couple of years, you have not touched that money until now.
Because you want to preserve the chance to tap the value in your home again should it ever become necessary, it worries you to read that homes in Indiana have begun to stay on the market longer, signaling that the big price “boom” may be over. Meanwhile, along with everyone else, your living costs have risen (you’ve already received notice from your pharma plan of bigger co-pays). Without being too “paranoid,” you’re trying to be smart about “gearing up” to remain financial self-sufficient in the years to come.
Since your plan is to continue occupying your home, you might consider converting your “housing wealth” (home equity) into a contingent source of spendable income using a reverse mortgage set up as a “line of credit.” This move would address two of the concerns you mention in looking towards the future:
a) Should stagnation or even a decline in the value of your home come to pass in the future, even were the reverse mortgage balance to exceed the property value, neither you (nor your heirs) would ever be liable for the deficiency.
b) If and when you take withdrawals from the line of credit, the money will be tax-free.* What’s more, the unused portion of your equity will be growing at the same rate as that being charged on the loan.
A reverse mortgage can be a way for you to prepare your housing resource now for “spendabillity” later.
https://mutualreverse.com/david-garrison
*Please consult a tax advisor. 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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