Did you know, homeowners 62 and up have over $9.5 trillion¹ tied up in home equity? Helping your clients unlock and leverage some of that home equity as part of an overall retirement strategy can prove a winning move for you and the families you serve. Bring greater balance, diversification, and risk management to the families you serve.
Today, advisors are looking for ways to preserve investments, avoid portfolio losses, secure cash flow and back-up emergency reserves. How can home equity bridge the gap? It’s a financial tool that has been specifically designed for homeowners 62 and older.
The Home Equity Conversion Mortgage (HECM) loan is an FHA, government-insured, non-recourse loan on a primary residence, for people at least age 62:
Proceeds from a HECM loan can be distributed monthly, in a lump sum, as a revolving line of credit, or a combination of these. A HECM Line of Credit (HECM LOC) provides access to equity at a predictable growth rate regardless of real estate performance. With a HECM line of credit (HECM LOC), the available funds grow each month, which represents an increase in the amount of funds available to be borrowed.
An eligible couple lives in a home valued at $700,000 and owes $240,000 on their mortgage. They take out a HECM loan which pays off their current mortgage and opens a total credit of $113,200. This line of credit grows over the next 10 years to be worth $467,512. They delay a monthly payment on the loan for 2 years, and then start a monthly payment of $2,600 for a total of $31,200 over the life of the loan.
This example is based on IMIP of $14,000, origination fee of $6,000 and other settlement costs of $2,000. HECM as of 05/12/2020.
With a HECM LOC, you and your clients can respond better to market swings. Borrowers can access their loan proceeds during market downturns rather than draw down their investments. Similarly, by using their loan funds to supplement their income, they may be able to delay taking social security benefits until they reach full retirement age (borrowers should consult with their financial advisor).
High-Value Properties: Clients can access up to $4 million in equity on high-value properties with a proprietary reverse mortgage, AAG’s Advantage loan. There is no mortgage insurance required, no capital gains or income tax on loan distributions³ and all loan proceeds are accessed in one lump sum.
Buying a Home: If you have clients seeking to downsize or move closer to family, friends and more of the lifestyle amenities they enjoy, they can purchase a new home, with a combination of their funds and a HECM loan, also known as a HECM for Purchase.
Funding Home Care: According to The Joint Commission, home care can help many patients achieve optimal health outcomes.² With a HECM, your clients may gain greater financial flexibility over their health care decisions, including the choice of aging and living comfortably in place. Borrowers could be subject to foreclosure for reasons including failure to maintain the property or to pay taxes and insurance.
All AAG options: VA, FHA, traditional, refinance, jumbo, jumbo reverse, reverse for purchase and jumbo reverse for purchase loans.
¹Senior Housing Wealth Tops 9.5 Trillion for First Time" – Reverse Mortgage Daily. October 17, 2021. https://reversemortgagedaily.com/2021/10/17/senior-housing-wealth-tops-9-5-trillion-for-first-time/
²Home-The Best place for Health Care”- The Joint Commission.2011. Web.22 Jan 2016. http://www.johnahartford.org/images/uploads/ resources/Home_Care_position_paper_4_5_111.pdf
³Capital gains taxes are only due upon a sale. A Jumbo Reverse Mortgage is a loan, secured by a mortgage on the home, and does not require sale of the home. The proceeds of a loan are not taxable as income.