6 Common Situations Where a HECM Makes Sense
Here are 6 common scenarios where a senior might decide to get a HECM reverse mortgage:
1. You live in an area where home values are rapidly depreciating due to market conditions. You can lock in the value of your home now, and you will never have to pay back more than the current market value of your home at the time you sell, effectively placing a short bet on your home.
2. Your retirement portfolio is rather light, and longevity runs in your family. For 80% of adults aged 65+ who own their homes, home equity represents 60-80% of their total net worth. A HECM Reverse Mortgage is a way to access the wealth in your home, without having to sell it first. Some people are very strategic about this. If you obtain a HECM Reverse Mortgage line of credit as soon as you are old enough to qualify, but don’t touch the funds, the line of credit will continue to grow each year. You can save this and use it if/when their is a major market event disrupting your portfolio. That way you can delay your withdrawals until the market has a chance to recover, thus extending the life of your portfolio.
3. As a supplement to, or in lieu of long term care insurance. Perhaps you’ve passed the age where you can purchase long term care insurance. Or maybe you discovered that If you find yourself in need of nursing care, or extra funds to pay for an unexpected health crisis or financial hardship, a reverse mortgage can help.
4. You live in a state, like Florida, where you meet the income requirements for Medicaid, but the equity in your home is more than the $560K limit. You may wish to obtain a HECM reverse mortgage, and then work with a solid estate planning attorney to shelter the funds in a way that legally allows you to collect Medicaid benefits. (Different states have different requirements, so be sure to check with your specific state agency.)
5. Your house/condo is paid off, and you wish to trade up. Perhaps you would like to move into a new retirement community. You don’t want a mortgage payment, but you do want a little nicer living situation. A HECM Reverse Mortgage for purchase can accomplish this.
6. You have no heirs. A HECM reverse mortgage is one of the few ways you can access the equity locked in your home while you are still alive, without having to make monthly payments, and without having to sell and move out of your home. If you have no heirs to whom you plan to leave the home, then you may wish to spend it while you are still around to enjoy it.
Punchline: There are many situations where a HECM Reverse Mortgage might be able to help you. If you are worried about rising medical expenses, outliving your retirement savings, or having the financial resources to maintain your home, then a HECM reverse mortgage can be one more arrow in your financial quiver.
For more information, call Freedomstar Financial at (888) 659-0033.