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posted: 4/18/2019 1:00 AM

The stories of the Home Equity Conversion Mortgage

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By Richard Glover
American Advisors Group

I've written, spoken and presented many times about the virtues of the Home Equity Conversion Mortgage. That loan designed for those 62 and older that people appear to "avoid like the plague." There are too many myths and sensational stories and a lot of misunderstandings about what it is, how it works and what it can do to improve most anybody's retirement.

Here are some success stories (names have been changed)

Erin: After her husband passed away one income in the household was lost. Adding further stress, an investment of retirement funds was lost completely. The financial situation was helped by her children but she didn't want to rely on them and it affected her dignity. She did a HECM with the option to draw $1,000/month. Her worries of running out of money, relying on her kids and leaving a legacy to her children have been eliminated.

Marcus: He knew he'd have to do a HECM one day and had $20,000 nest egg that needed to last a lifetime. Behind on his taxes and concerned about the future, his HECM established a fund to pay his taxes and insurance, over the next 18 years, and created a line of credit that will make it possible for him to enjoy his retirement with financial comfort. The line more than tripled his available nest egg!

Tom and Katie: They had a large mortgage on an expensive home with a corresponding high payment. Not yet retired and still earning good money, they decided if they could eliminate that payment, they could slow down a little, enjoy their second home and maintain their residence near their grandchildren. They needed a fair amount of cash to close but not having to make that monthly mortgage payment justified the cash outlay. His quote upon analyzing things initially: "This is a really good deal!"

William: After receiving notice that his HELOC was going to require a large balloon payment later in the year he called to explore his options. He didn't want to make another big draw from his 401(k). Upon further analysis he also qualified for $1,100/month for the rest of his life in the home and this was about the amount he was drawing to cover his monthly expenses. The result was his taxable income was reduced, he only takes his RMD from his 401(k) and his income is now low enough to qualify annually for the senior exemption and senior freeze with no impact to his lifestyle. His quote: "This thing is beautiful and I don't understand why people avoid it."

Stan and Cindy: They saved diligently for retirement and have what they would consider a decent nest egg. Their home was still their biggest asset so they decided to establish a "standby" line of credit. Not needing any money today, they set up the line of credit and every month the available line "grows" by over $2,000. Over a period of 10 years that means they have access to an additional $240,000. The total available line is estimated to be over $500,000 after the 10-year period if they didn't draw any funds. This is the part about the HECM that if more people could figure out, they would see the tremendous added value as a long-term care, cash flow, in-home care, home improvement and many other solutions.

Everyone has their own fingerprint when it comes to retirement and mortgage programs. In all of the (and many more) examples here, these HECM borrowers are extremely satisfied and would do it again. Devised in the Reagan years the HECM was designed to help people. Done right, it relieves financial burden, eliminates worry and stress resulting in a better overall outcome.

Whether you are going to rely on home equity early in retirement, during retirement or later in life, it is a good idea to include the home equity in the retirement equation and then figure out how to best leverage to your needs and situation. Do yourself and your family a favor and get a Reverse Mortgage now! Once you find your own success and satisfaction story, you and your family will be happy you did.

• Richard Glover is Reverse Mortgage Professional with American Advisors Group. Contact him at (630) 660-8444 for information on how the HECM works best for you.