Why The Reverse Mortgage Options?
A reverse mortgage can be more than a last-resort tool — when used wisely, it can be a strategic part of retirement planning. Here’s why:
Tap into home equity without moving
You convert part of your home’s equity into cash, while continuing to live in and own your home — no monthly mortgage payments (as long as you keep up with taxes, insurance, and maintenance). Your spouse can continue to live in the home as well.
Flexible payout options
Choose from a lump sum, regular payments, or a line of credit you draw on as needed. 60% of the principla limit in the first year. The “60% rule” limiting upfront draws on a Home Equity Conversion Mortgage (HECM) was introduced by the Federal Housing Administration (FHA) in 2013 as part of the Reverse Mortgage Stabilization Act to prevent borrowers from depleting their home equity too quickly.
Line of credit growth (HECM)
In the HECM reverse mortgage, the unused line of credit grows over time (compounds at the effective interest rate), is tax free, always available if need be, thereby increasing your borrowing capacity later — effectively giving you a “future buffer.”
FHA Non-recourse protection
You or your heirs never owe more than the home’s value when the loan is repaid (when you move, sell, or pass away).
Preserves other assets
By using the line of credit, you can choose to use your home equity first and leave your investments to grow avoiding distribution fees or being taxed, or coordinate withdrawals from various assets.
Enhances retirement flexibility
According to research and commentary by Dr. Wade Pfau, reverse mortgages can improve portfolio sustainability. He often emphasizes that reverse mortgages offer liquidity to a typically illiquid asset — your home — giving retirees more options during market downturns.
Strategic timing
Opening the line of credit early can be advantageous: the longer your credit line grows unused, the more value you get from it over time as it grows at the same interest rate as your loan.