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#98 Annuitizing housing assets through a reverse mortgage


August 22nd, 2022

Of all your investments, the one that, ironically, feels most comfortable right now is the one that’s the least exciting — a fixed annuity you bought seven years ago. That annuity has been faithfully delivering a monthly deposit into your bank account. Given the turmoil in both stocks and bonds, you’re now wondering whether you shouldn’t have put more of your assets to work in that “boring” fashion!

Now retired from your full-time career, you’ve been supplementing your income from Social Security and a modest pension with part time work. Your home is all but paid for, but the recent dramatic escalation in everyday living costs has begun to “squeeze” your budget. A couple of years ago, you converted some growth investments into those designed to generate higher income, but it has been uncomfortable watching the basic portfolio value erode.  Even understanding that converting to fixed annuities means using up principal over time (not to mention reducing the possibility of leaving a legacy to nieces and nephews), you’re wondering if setting up more fixed annuity income shouldn’t be your next move.  You’re facing a dilemma: Having more fixed monthly income, income flow guaranteed for life, is very appealing. Still you know your expenses are inevitably going to increase over time, and any fixed annuity payment will be just that – fixed.

One path to consider might be a reverse mortgage, which would be a way of “annuitizing” your housing wealth. So long as you are still occupying your home, keeping up with homeowner’s insurance, property taxes, and home repairs, you can make use of the equity you’ve built up in your home. There are two approaches to consider, with the first converting your equity into a “tenure” payment, in which regular monthly income payments would continue for the rest of your life regardless of changes in the value of your home, and regardless of the mortgage loan balance!

A second approach would allow more flexibility, in that you would establish a line of credit, taking “draws” as needed. Meanwhile the unused portion of the line of credit would continue to grow at a rate guaranteed to match the interest accruing on your silent loan balance, giving you much greater control over the “annuity” income flow, possibly even allowing you to make lifetime gifts to those nieces and nephews.

While you will want to consult your advisors before committing to annuitizing your housing wealth, such a plan will help stabilize your cash flow without needing to sell out of your portfolio investments just now when they are “down”.

Your home can be a “fixed annuity”, but one with wiggle room!

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894