A retirement tool for the 21st century

The retiree’s equity line of credit because everyone needs a Plan B

Planning for your retirement is a daunting task for even the best financial planners. Recent studies have shown men have an increasing likelihood to live until age 90 and more women are living until 95.

If you take a look back over the last 30 years or so, you’ll see some periods of fantastic growth along with periods that wreaked havoc on retirement portfolios.

The New Reverse Mortgage

The RELOC introduced in October 2010 represents a new potential risk management tool for advisers and retirees

The New Reverse Mortgage or Retiree’s Equity Line of Credit (RELOC) has helped countless seniors sleep better knowing they have a backup plan in case retirement doesn’t play out as they hoped.

Life is what happens to you while you’re busy making other plans. – John Lennon

Previous reverse mortgage products have been primarily avoided, other than as a last resort, because of the limited number of options available to meet the needs of senior homeowners.

The RELOC is similar to a traditional Standard Reverse Mortgage; however, it offers flexibility and affordability previous versions didn’t have.

How does the Retiree’s Equity Line of Credit work?

The RELOC has some attractive features:

  • The borrower controls when, and if, he or she uses the line of credit.
  • Loan debt can be paid back at any time without a penalty.
  • If the owner decides, the loan is never paid back during their lifetime as long as they remain in their home.
  • The income received from the reverse mortgage is tax-free, and the interest, when paid, may be tax-deductible.
  • The unused line of credit grows over time, independent of the home’s value, at the same effective interest rate that would accrue to an outstanding loan balance
  • Unlike traditional HELOCs the Retiree’s Equity Line of Credit Reverse Mortgage cannot be cancelled or locked if your home’s value declines. Remember 2007-09?
  • The terms of The New Reverse Mortgage are guaranteed by the full faith and credit of the United States

The Retiree’s Equity Line of Credit is a non-recourse loan

Upon sale or death, the repayable debt of the mortgage will not exceed the home value. For example, if the loan balance grows to $300,000 and your home value increases moderately over time to $220,000, the client (and potentially the estate) is not liable for any amount owed above the property value upon sale or death. The FHA insurance would reimburse the lender for the amount of the loan above the home value.

The New Reverse Mortgage isn’t for everyone…but it could be!

If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.

Some of this information first appeared on reversemortgagedaily.com

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