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How to Potentially Protect Your Client’s Portfolio with a Reverse Mortgage

“Using reverse mortgages as portfolio buffers and emergency reserve funds will help protect against the premature eroding of portfolio assets because of poor timing.”1

There are many ways a reverse mortgage can be used as a practical way to benefit your clients’ portfolios. If used strategically, they can even see potential growth in their available funds through a reverse mortgage line of credit.

Tapping into home equity can help eligible clients leave his or her investment portfolio untouched for longer, can allow for a delay claiming Social Security, and can enable homeowners to free up some cash to enhance investment portfolios. Here’s how.

Build more wealth:

By using a reverse mortgage as a financial planning tool, your client may be able to leave his or her investment portfolio untouched, allowing it to gain in value or avoid selling investments at a loss.

Particularly during economic downturns and when stock market investments have taken a hit, this strategy should be considered. For many retirees, the post-recession era was a difficult time to withdraw from retirement accounts that had lost value. Tapping into home equity during times like these and allowing investments to rebound can prove effective in some cases. In fact, research has indicated the reverse mortgage line of credit is a tool that can help mitigate sequence of returns’ risk for retirees who have invested retirement assets.1

Flexibility of funds:

Whether a client delays selling retirement investments or uses the reverse mortgage funds for some other purpose, ultimately tapping into home equity can offer successful financial options for retirement.

A reverse mortgage can be used to pay for health care and living expenses, or it can be used as a potential safety net for clients who may still want to take liberties with their other investments. Home equity is not a silver bullet, but renowned researchers have shown that some retired homeowners may be better off when they use a reverse mortgage as part of their retirement strategy.

Important:

The reverse mortgage borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance.  The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

If you are interested in learning more about reverse mortgages and how to talk to your clients about accessing home equity, contact an expert at Finance of America Reverse.

*Not tax advice. Consult a tax professional.

1 Jeffrey Levine, CEO, BluePrint Wealth Alliance, “Protecting Clients’ Portfolio Assets with a Reverse Mortgage,” ThinkAdvisor, January 4, 2017. http://www.thinkadvisor.com/2017/01/04/protecting-clients-portfolio-assets-with-a-reverse

 

Oregon Only:·When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. FAR may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan).·The balance of the loan grows over time and FAR charges interest on the balance.· Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.

©2020 Finance of America Reverse LLC is licensed in 50 states and D.C. | Equal Housing Opportunity | NMLS ID # 2285 | www.nmls.consumeraccess.org | 8023 East 63rd Place, Suite 700 | Tulsa, OK 74133 CNot all products and options are available in all states | Terms subject to change without notice | AZ Mortgage Banker License #0921300 | Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act | Georgia Residential Mortgage Licensee | Illinois Residential Mortgage Licensee | Kansas Licensed Mortgage Company | MA Lender/Broker #MC2855 | Licensed by the Mississippi Department of Banking and Consumer Finance | Licensed by the New Hampshire Banking Department | Licensed by the N.J. Department of Banking and Insurance | Licensed Mortgage Banker — NYS Banking Department where Finance of America Reverse is known as FAReverse LLC in lieu of true name Finance of America Reverse LLC | Rhode Island Licensed Lender | HUD HECMS REQUIRE PAYMENT OF INITIAL AND PERIODIC MORTGAGE INSURANCE PREMIUM.