Savvy Senior Uses Reverse Mortgage I was fortunate to recently work with a senior who was very strategic and smart about using her home equity. This 82 year old was as sharp as they come, highly educated and in the financial field. She needed to access $300,000 for a short period of time (less than a year) and didn’t want to withdraw funds from retirement accounts, IRA’s, CD’s and the like. So she looked into the new HECM SAVER.
Things she considered:
- Upfront Fees - Much lower on the SAVER
- Interest Rate - Lower on the Adjustable
- Available Funds - SAVER provided plenty for her needs and using the ARM allowed her to only access the amount she needed.
Because she lived in a high value home worth over $800,000, she was able to qualify for $344K in funds with zero origination fees, zero upfront Mortgage Insurance Premium. In about six months she will repay the reverse mortgage down to a very small balance to keep the equity line available should she ever need access to it. (No prepayment penalties on a HECM Reverse Mortgage)
Here is a snapshot of what she did.
- $800,000 Home Value
- $344,000 Appx Available Loan based upon Age, Interest, Lending Limit
- $ 2,400 Closing Costs
- $ 0 Payoff Current Mortgage
- $341,600 Available Loan Proceeds
- $300,000 Lump Sum Disbursement to her Checking Account
- $ 41,000 Line of Credit
In six months, when she is ready to repay the loan, I advised her to just pay the loan down to a very small balance. (If she completely pays it off that will close the loan) Since the loan is an “Open-Ended” loan if she just pays it down her line of credit will correspondingly increase. That increased line of credit can be used in the future for unexpected financial needs that may come up (Medical Expenses, In Home Care, Other Needs)... or she may never need it. The carrying costs on that paid down loan would be very small. In my personal opinion this is a great example of a strategic use of of an HECM SAVER Adjustable by a savvy Senior!
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