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#13 High Home Values, Low Interest Rates Increase Utility of Reverse Mortgage Line of Credit


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

You’re the proverbial “ducks-in-a-row” type, and you’ve already begun to plan for your retirement four years from now (which is when you first become eligible for full Social Security benefits). One big piece of the puzzle is your home, two and a half years away from being mortgage-free.

You’ve refused multiple offers to purchase this house from you, but your intention is to continue to occupy it, hopefully for the rest of your life. Widowed for over a decade, you have a steady companion who lives in a neighboring state. While you enjoy traveling together and spending time in each other’s homes, you’ve concluded it will be best for both you and him to keep permanent residency in your present locations.

As one piece of your own retirement plan, you have decided to take out a reverse mortgage on your home, set up as a line of credit to fund any serious future medical costs. (While you plan to keep up with the premiums on the long term care insurance you purchased some eight years ago, the policy does not cover home health care.) The question with which you are now wrestling is whether to establish the mortgage loan today or to wait until your retirement date is imminent.

It’s apparent that you are giving careful thought to each of your retirement planning decisions. There is no one “best” time to apply for a reverse mortgage on your home, but there are a number of factors you might consider. First, home values (as you’ve learned from the multiple, unsolicited offers you’ve received on your own home) are at record highs, meaning that your equity or “housing wealth” is at a premium. Were home values to decline in the future, establishing a reverse mortgage today would be a way of “locking in” the present value of your equity. Additionally, today’s low interest rates are providing the highest principal limits (think Home Equity Line of Credit size) in years.

Remember, too, that, should interest rates rise from today’s record lows, the unused portion of your Home Equity Line of Credit would have growth matching that increased interest rate, in essence building up your “healthcare slush fund”.

In counting down towards retirement, a reverse mortgage could be a way to make your housing wealth – count!