Many older adults are looking to proprietary reverse mortgage loans as a tool to incorporate into their overall financial plan during retirement, but many have also experienced its benefits when the stock market is volatile. With borrowers saving for retirement through investments, savings, and pensions, they may want to consider alternative sources of money until the economy stabilizes. Tapping into one’s home equity through a reverse mortgage loan may be the answer.
Proprietary Reverse Mortgage
A proprietary reverse mortgage loan, also known as a jumbo reverse mortgage, is designed for borrowers whose homes are in the higher value range and converts a portion of their home’s equity into cash. For borrowers whose home value exceeds the traditional Home Equity Conversion Mortgage (HECM) limit of $970,800, a proprietary reverse mortgage allows homeowners to access up to $4 million (varies by lender). The Federal Housing Administration (FHA) does not insure proprietary reverse mortgage loans, so lenders do not have to follow FHA guidelines.
Using a Home Equity during a Down Market
A study by The Center for Retirement Research at Boston College showed Americans over the age of 65 often have more cash in their homes than in 401(k)s, IRAs, or other investments. The average U.S. homeowner age 65-74 has $125,000 in financial assets. Similarly, those same individuals have an average of $150,000 in home equity. The difference increases to $115,000 in assets and $160,000 in home equity, between the ages of 75-84.1 For many, much of their wealth appears to be in their homes.
There is no guarantee the money you have saved for your retirement will not be affected by the volatility of the stock market. A proprietary reverse mortgage can also help older adults curtail withdrawing from their IRA or 401(k) accounts at a loss. As an alternative, older adults may use a reverse mortgage until the portfolio recovers and minimize the likelihood of depleting the portfolio too soon.
If you’re interested in speaking to a licensed loan advisor about the benefits of a proprietary reverse mortgage, call 800.976.6211.
1Center for Retirement Research at Boston College. Using Your House For Income In Retirement. http://crr.bc.edu/wp-content/uploads/2014/09/c1_your-house_final_med-res.pdf.