By all accounts, my dad was a funny guy. Looking every bit the part of the aerospace engineer he was by profession, no one ever expected him to have a piercing sense of humor or the ability to capture just the right turn of phrase – but he had both, and his humor was often profound.
One funny phrase he used occasionally was “a bad idea whose time has come.” He did not say this often, but an example of something fitting into this category might have been the Stuxnet software worm, if he had lived long enough to see it.
So why in the world do I bring this up?
This past week I received a call from a private wealth advisor who referred a client. While on the phone the wealth advisor said, “I always thought a reverse mortgage was a bad option people turned to when they were desperate. But during this month’s advisors’ meeting, reverse mortgage was suggested as a potential element of a well-rounded, long-range retirement plan.”
Bingo, my friend.
And more than ever, right now there are truly profound reasons to consider a reverse mortgage.
First is this: few financial experts anticipate interest rates will stay low. With a reverse mortgage, there is not a monthly mortgage payment, so that’s not how rates figure in. However, interest rates impact how much money the client receives – and even a small rate increase negatively impacts how much money the homeowner can access. In fact, if rates go up to 4.06% – which for much of history would be a modest rate – there would be a 26% drop in funds available to someone aged 68. That’s a hefty reduction.
A second consideration is that a reverse mortgage may enable a senior to delay drawing Social Security until age 70, when benefits are maximized. Most of us have seen the charts and know how much money we walk away from if we start drawing benefits at 62; less well-known are strategies available to help avoid an early draw.
A third thing to consider is this: there is an automatic growth rate associated with a reverse mortgage line of credit. This, in my opinion, is the least-known element of a reverse mortgage – and that’s a darn shame.
Each month, the unused portion of a reverse mortgage credit line grows bigger. This means that if you establish a line of credit now and let it sit until you need it, month over month the credit line will be bigger than it was when you originated.
Right now, more than ever, a reverse mortgage is a good option – whose time has come.
As I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.
If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.
Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com