Home Equity and the Retirement Crisis

The constant consternation played out by retirees over the Home Equity Conversion Mortgage (HECM) is bewildering. People choose to struggle in retirement by completely ignoring the fact that they have equity in their home.

Unlocking the equity in the home can greatly benefit the homeowner and make it possible to “age in place” more comfortably. A recent AARP Survey concluded that 76% of older adults prefer to age in place. Ultimately there is an impending retirement crisis in America and Home Equity could be the solution for many people. Most retirement accounts are underfunded, people are forced to work beyond regular retirement years or take part-time jobs to make ends meet and for the majority of people Social Security is the primary source of household income. Even if you did plan well, the addition of a HECM to the overall plan typically improves all outcomes and reduces the likelihood of outliving your money. At AAG we have an “agnostic” approach to home equity. We can help you sell your house to get access to the equity, we can do a first mortgage to help someone utilize a portion of the equity or we can assist with a HECM that offers a variety of features to meet the needs of a potential borrower’s unique fingerprint.

In most cases, for those 62 or better who want to age it place the HECM can be the best decision. You have government guaranteed product that allows the borrower to access a portion of the equity in their home as needed in a number of ways. Perhaps $300/month for life (in the home) or $1000.00/ month for 10 years would be helpful, or you could pay off a mortgage thus eliminating the monthly principal and interest (still have to pay taxes and insurance) that is cutting into monthly cash fl ow, finally simply establishing the HECM line of credit for future use of funds later in life can be a great addition to a retirement plan. Throughout life people are posed with the opportunity to borrow against the equity in their home for a myriad of reasons. Remodel a home, new windows, consolidate debt, pay for college, buy a car are all common choices for many homeowners as they work to pay of their house before retirement. Then suddenly when cash fl ow becomes even more important most retirees stick their heads in the sand and ignore their biggest asset. Avoid the impending crisis, plan for the future, and realize that a HECM isn’t for desperate people, it is a tool to help you “Retire Better!”

Editor’s Note: This article was submitted by Richard Glover, Reverse Mortgage Professional with American Advisers Group and may be reached at 630 660 8444 or by e mail at rglover@aag.com