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"Reverse Mortgage Line of Credit Best Taken Early…"

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Mortgage and Lending with PS Mortgage Lending 305-791-4874 or 888-845-6630 365768

"Reverse Mortgage Line of Credit Best Taken Early…"

Say Financial Planners

As more time passes after the changes to the home equity conversion mortgage program, financial planners have begun to see the potential benefit of  mortgage.

More specifically, a reverse mortgage line of credit. 

According to an article published in Reverse Mortgage Daily, researchers Sahun Pfeiffer, C. Angus Schall and John Salter have published a new report on the benefits of a reverse mortgage line of credit and answers a fundamental question, "should the line of credit be taken now or only as a last resort?"

The reverse mortgage line of credit works best when taken early:

“The results show an estimated 30-year survival advantage for early establishment,” the report states in its conclusion comparing the early establishment of the loan versus prolonging it as a last resort. This holds true under various future interest rate and home appreciation scenarios for real withdrawal rates between 4 percent and 6 percent."

As a retirement planning tool, the line of credit can be an extra "rainy day fund" for the future. The LOC carries a growth rate, ensuring that every year, the funds continue growing if and when the time comes to use the LOC. In addition, the line of credit can never be frozen (as long as there are funds in the account.) Most importantly, a line of credit gives borrowers the freedom to use their money when they need to, not when they have to. 

However, postponing getting a line of credit until it is necessary, or for later in retirement, endangers the potential benefits of this rainy day fund, especially if the line of credit has not had the opportunity to grow over the years.

If a borrower wants to use a reverse mortgage as a retirement planning tool, like any other retirement plan, the sooner the better.

It's the equivalent of only having a savings account when there is an expense looming in the horizon. A reverse mortgage line of credit is there if a borrower needs it, it doesn't mean they will need it, but it's a good backup to have if the other plans they've made for retirement aren't working as they should be.

The researchers, however, are adamant that if a borrower has a good reason to believe that they will not age in place:

However, postponing the establishment of an HECM line of credit should be considered when the adviser and/or client has good reason to believe that home occupancy after loan origination is likely to last less than 15 years.

The reverse mortgage program was created as a way for seniors to age in place while taking full advantage of the equity they have accumulated throughout their working years. However, if it's in a borrower's plans to move elsewhere in two years, for example, after getting the line of credit or prefer to sell their home and travel the world, a line of credit may not be the best decision. 

However, if you intend to live in your home for many years afterward, while your rainy day fund continues to grow, a reverse mortgage line of credit may be just the thing to make your retirement all the more advantageous.

If you want more information on the reverse mortgage program give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.comWe do not pressure those who inquire. We are simply here to help.

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Information and content in this blog is original to Phil Stevenson

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Phil Stevenson

PS Financial Services

Owner and Principal Mortgage Originator

Certified Reverse Mortgage Professional (CRMP)

LO #365768

NMLS #968090

Cell: 888.845.6630

Miami Mortgages & Florida Mortgages

Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

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