As I mentioned in the previous post, financial advisors are suggesting to their wealthier clients to consider using funds from a Reverse mortgage in lieu of drawing down on their investments. The number one concern of just about everyone, is running out of money and one way to slow that possibility down, is to use a Stand By Reverse loan.
Here is the remainder of the article:
HuffPost: Why Reverse Mortgages Make Sense for Affluent Boomers
Posted by Emily Study On July 8, 2015
“This is not just for the destitute, which is what the perception was for quite a long time,” Fiore told The HuffPost. “That’s when you will start to see the volume increase because people will look at it as a legitimate tool for retirement.”
A shift in reputation has also led to reverse mortgages becoming a bigger part of the financial planning conversation, with advisors embracing the product as a way to hedge against future costs and plan ahead.
“The financial planning community has really adopted the product in a positive way,” Fiore said.
In closing I would like to mention a study from last year called “The 6% Rule VS the 4% Rule in that various scenarios were created, showing how using a Reverse loan could extend the longevity of retirement funds by many years.
The study was written by Gerald Wagner, Ph.D and in the study he found that ” the 4% rule works well with portfolios that are at least 50% invested in equities and then shows how the use of a reverse mortgage can be used to ‘easily create new rules, such as the 6% rule for a 30 year horizon'”.
For a very long time, the average perception of a borrower for a Reverse mortgage, was someone who was virtually destitute. However, that image has shifted over the last several years, as it as become apparent that many affluent individuals are seeing it as one way to leverage their investment portfolios.
The HuffPost published an article last month that discussed the fact that more wealthy or affluent homeowners are looking into using the Reverse loan for retirement planning. Plus, having a Jumbo Reverse loan that lends up to $2,000,000 has made it possible for those who have “high” value properties, have access to their equity and without the monthly obligation of a mortgage payment.
Here is the first part of the article that I will share in two posts because of it’s length.
HuffPost” Why Reverse Mortgages Make Sense for Affluent Boomers
Posted By Emily Study On July 8, 2015
“Long considered a loan of last resort, reverse mortgages now have their place in financial planning for even the mass affluent, a cohort of 10 million to 15 million baby boomers who have between $750,000 and $2 million of net worth at retirement, according to an article by The Huffington Post.
These homeowners, who could have homes valued at up to $1 million, are likely to see the most reverse mortgage benefits, experts say.
“That’s because it doesn’t take into account the volatility of the securities portfolio of the 401(k) account or the IRA,” the HuffPost writes, noting that drawing from securities portfolios when the market is down can exhaust a person’s retirement funds.
AAG has seen a growing number of wealthier people enjoying the benefits of a reverse mortgage, because they want access to a line of credit in their homes, Paul Fiore, executive vice president, said.
One way the cohort can access that home equity is through a jumbo reverse mortgage, a product that specifically targets affluent Americans with high-value homes by giving them the opportunity to tap into more of their home equity. While the market for the jumbo product is near absent, there remains a huge need for more jumbo loans, especially as reverse mortgages gain a wider acceptance among those outside the industry. ”
The remainder of the article will be in a following post.