While both of you have officially retired for more than seven years, you each serve as part-time adjunct professors at a local college. Both your children, neither of whom lives nearby, seem to be on a good track financially. You’ve long completed the “aging in place” renovations, and hope to spend the rest of your lives exactly where you now live.
Each year you have funded a scholarship, awarded to a deserving student in the health sciences field. You feel ready to make a larger – and a longer term – impact, but are wary of overtaxing your jointly held investment portfolio.
Truth is, you’re less concerned with leaving money to your sons as you are with remaining self sufficient in case of future health setbacks. You’ve been discussing this for a while, and realized that in essence, your desire is to make a positive impact in the field of health science without your own future security being negatively impacted.
One idea under consideration has been refinancing the home (which you know has appreciated greatly over the past few years), using the money to make a one-time meaningful gift in the form of an endowment to the college, out of which the annual scholarships would be taken. You like the idea of making a decisive move today, then letting the college officials choose the recipients of three or four scholarships each year. The payments on the loan would be manageable, you feel, (the tax deduction would help offset some of the debt), and you would take pride in having an endowment in your family name.
It’s possible that accessing your housing wealth in a different manner might provide a more comfortable solution. With a reverse mortgage, you would be accessing dollars to fund your endowment without taking on an obligation to make payments every month or quarter. As you’ve stated, the growth in your home value could allow you to access meaningful funding. Of course, you would continue to pay the property taxes, insurance, and maintenance costs on the home. Any portion of your equity not borrowed, meanwhile, would be credited with growth at the same rate as the interest being charge on the borrowed funds.
Some adjustments to your estate planning will probably be needed, but using your housing wealth to endow annual scholarships can turn out to be a smart – and rewarding way to make an impact in the health sciences field.
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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