As a financial advisor, you may be overlooking a significant planning tool… a reverse mortgage line of credit. The government regulated and insured FHA Home Equity Conversion Mortgage or HECM is designed to help seniors of every economic stratum.
As recent peer reviewed studies conclude, it can be an important strategic tool to be incorporated into a mass affluent client’s retirement plan. Its unique Line of Credit provides seniors access to tax free cash flow and can grow significantly over time. For the mass affluent client, this adjustable-rate line of credit can be of great value in mitigating the sequence of returns risk.
By implementing a coordinated withdrawal strategy, especially during a down market, clients take needed distributions from the line of credit instead of liquidating assets from their investment portfolio. This greatly reduces the negative potential effects on portfolio size, growth, and longevity by leaving the portfolio intact and invested in the market… poised for the next bull market phase… while preserving the firm’s assets under management. Dormant home equity is now accessible and can serve as a non-correlated portfolio buffer asset supplementing income whenever needed.
A HECM Line of Credit provides seniors with the ability to “Age in Place” in the safety, comfort, and freedom of their own home, by providing the funds to replace, remodel or upgrade. It can also be used to cover long term care insurance premiums or pay caregivers directly. A HECM Line of Credit is a kind of insurance policy – with available contingency assets – for a variety of planned and unplanned expenses that many seniors encounter during retirement.
Another great feature is the approved line of credit cannot be reduced, frozen or taken away, even if there is a housing correction or sharp market downturn. And because the line of credit is open-ended, they can pay it back and use it again and again. Also, interest is charged only on what your client uses.
To find out how partnering with a reverse mortgage professional can help your practice, call us today.