Do you have a high-value home? Here’s how a reverse mortgage can help you live the retirement of your dreams.
Finally, a retirement funding tool designed with seniors in mind. What’s your vision of retirement? More time with family and friends? A new or renovated home? Helping your grandkids with college tuition? Whatever you want out of life, your home equity can help you fund it—and a reverse mortgage can help you access it.
Once thought of as a financial tool of last resort, reverse mortgages are making a comeback, as financial advisors and consumers alike discover that tapping into home equity can be a useful part of a sound retirement plan. And the more home equity you have, the more cash you can get for the things you want—without depleting your retirement investments.
That’s why more seniors with high-value homes are looking into proprietary, non-Federal Housing Administration reverse mortgages, such as Longbridge Platinum. It offers up to $4 million cash, depending on your home’s value—and is a better, more stable option for seniors than a home equity line of credit (HELOC).
In fact, while recent pandemic-related job losses and shutdowns have led more Americans to think about accessing their home equity, it’s become harder to do so. You may have read the headlines: several major banks and forward-mortgage lenders have been forced to suspend HELOC applications and originations. So, as it becomes more difficult to secure a HELOC, more borrowers age 60 and older1 are exploring their reverse mortgage options.
Home equity: cash for the things you want—and the things you wish for your family.
Your invested assets can lose a significant amount of value quickly, such as during the recent market downturn that occurred due to the COVID-19 crisis. The temptation at times like those is to sell some investments to help maintain your retirement lifestyle. But selling at a loss is the last thing you want to do.
That’s where home equity comes in—and considering how much is available to older adults today, it’s amazing more people don’t take advantage of it. In fact, homeowners age 62 and older saw their collective housing wealth increase by 1.6% in the first quarter of 2020—an increase of approximately $120 billion over the previous quarter, to a record of $7.54 trillion2 in total equity. Instead of selling off your investments, you can access a portion of your home equity to use when you wish, as you wish.
When most people think of tapping into home equity for an infusion of cash, a HELOC is what comes to mind. But there are a number of advantages to taking out a Platinum line of credit instead.
- The Platinum line of credit grows over time.
- Lenders can freeze a HELOC at any time—especially during economic downturns. With a reverse mortgage, the lender cannot reduce the amount available to you.
- As compared to a HELOC, Platinum features low upfront costs, comparable rates, and is easier to qualify for.
- A HELOC requires that you make monthly payments. With Platinum, monthly mortgage payments are optional.3
- Many don’t realize that HELOC payments are interest-only in the beginning, and then fully amortize after 10 years—which can pose a serious problem for seniors, when their HELOC payment suddenly spikes and they’re living on a fixed income.
- Platinum includes all the borrower benefits and safeguards of a standard reverse mortgage program. For example:
- A reverse mortgage is a non-recourse loan—which means that you and your heirs aren’t personally liable if the loan amount exceeds the home value when it comes due. A HELOC offers no such protection.
- Plus, Platinum comes with independent counseling to make sure you fully understand your options and responsibilities, and help you decide whether it’s right for you. No independent counseling is provided with a HELOC.
Experts Weigh In
More and more financial experts are recognizing these advantages—and the value of a reverse mortgage for seniors as a retirement planning tool.
Mark Orr, a certified financial planner with Retirement Wealth Advisors and author of “Retirement Income Planning: The Baby-Boomer’s 2020 Guide to Maximize Your Income and Make it Last,” recommends that retirees establish a reverse mortgage line of credit early in retirement—and let it grow until they need it for income during market declines. “You have this growing asset that can be used for sequence of return protection,” he says.4
John Salter, a professor of personal financial planning at Texas Tech University and partner at Evensky & Katz Wealth Management, points out that “A reverse mortgage could be a secondary source of cash.” Along with Harold Evensky and Shaun Pfeiffer, he has written two papers in the Journal of Financial Planning showing how a reverse mortgage can be used to reduce risk.4
How Can You Use the Proceeds?
There are any number of reasons you may want to supplement your cash flow so you can enjoy your retirement and do the things you’ve always wanted, without disturbing your invested retirement assets. Here are just a few examples.
Make home renovations. According to The American College of Financial Services, 83% of older homeowners (ages 55-75) would like to remain in their current home as long as possible.4 But many need retrofitting or renovations, such as ramps or easy-access baths, to make that possible. Or, maybe you’re just tired of your kitchen, and want an upgrade. Either way, a Platinum line of credit offers a way to get the cash you need for things you want, without adding a mandatory monthly payment.
Buy a home you like more, or that is better suited to your needs. If you’re not one of the 83%, you can still love the place you live in. If your home just doesn’t suit your needs anymore and you don’t want to go through the renovation process—or if there’s a great place you’ve had your eye on that you could afford with a little more cash—Longbridge Platinum can help you fund your dream home.
Help with a family member’s college tuition. For some, helping other people in their family gives them the greatest satisfaction. And being able to help pay for a grandson or daughter’s higher education is a gesture that could continue providing benefits for a lifetime.
Pay off other debts. If you have an existing mortgage—or healthcare, credit card, or other types of debt—you can use the proceeds from a Platinum line of credit to pay those off and eliminate the payments. That way you can put the money you would have spent toward the things you really want in life. Without having to make monthly mortgage payments.3
Make your wish come true. Just about everyone has something they’ve always wanted—or wanted to do—but never got around to it. Why wait if you don’t have to? Instead of leaving your equity sitting in your home, you could be sitting poolside, sitting in the vintage vehicle of your dreams, or doing whatever makes you happiest—with the peace of mind in knowing that you accomplished it in a financially responsible way.
Set up a financial “safety net” for the future. As retirement portfolios have taken a hit from market losses in the wake of the global COVID-19 pandemic, more senior homeowners are looking to tap into the largest contributor to household wealth: their home equity. While you can’t predict the future, you can prepare for it—by taking out a Platinum line of credit now, and watching it grow if you don’t use it until the future.
Wondering how much home equity you could access? To learn more about a Longbridge Platinum reverse mortgage, fill out the form on this page to get your free info kit. There’s no cost and no obligation.
1State exclusions apply.
3Real estate taxes, homeowners insurance, and property maintenance required.