Yours is simply a question of portfolio strategy and the unknown future. Still, a HECM Line of Credit
still may not have any value to you. A responsible person will at least
take time to carefully evaluate the options and apply its risks and rewards to
the unknown future.
There are simply too many diversification strategies to consider before we
can apply any benefit to your situation. Unless you have very specific goals, we usually prefer you meet with
your financial planner, estate planner, and one of our Advisors, to identify the
smartest and most strategic ways to use a reverse mortgage to prolong the life
of your porfolio.
There is one idea we share with those who enjoy your same fortunate
financial situation. This illustrates one benefit to having a HECM Line of Credit available at all times, and it opens the door
for new ideas that may apply to you:
In 2008 millions of people lost most of the value of their real estate,
purchasing power, and liquidity. Most of us were affected in some way.
Consider a 66 year old couple, who owned a $800,000 home outright in a
burgeoning neighborhood. In this particular neighbhorhood, the home values
dropped nearly 50%. Thus, the couple who thought they had an $800,000
asset, now had a $450,000 asset. Still, what good was the asset? They
didn't want to sell it and lose all they had put into it, and they couldn't tap
any of its value anyhow.
Had they got a HECM Line of Credit in
2007, they would have started with a $333,870 line of credit. That meant that at
the end of 2008, they would have actually had access to immediately liquidity of
$355,000 with a home worth just $450,000. If they had then waited it out,
by 2015, that LOC would have grown to $549,746. The value of the home
would probably just be $500,000 as it started to recover. So within a few
short years, they would actually have access to more liquid cash than the home
was actually worth. And by 2020, the line would be worth nearly $180,000
more than the value of the home. However, if rates were to climb just 1%
by 2016, that line would be worth $250,000 more than the value
of the home, assuming a 2% home value increase each year.
they could have hedged for a severe market downturn using a reverse mortage.
They could withdraw the $796,000 by 2020 even with the home valued at $550,000,
without recourse, and had 150% of its purchase power for a new home.
Had this couple waited to get one in 2008, they would have only received $241,000
and that line would have grown to $536,000 by 2020 under the same rates. It is never
wise to wait, especially when values are heading upward in any market.
This is just one way to approach the strategic planning of a reverse
mortgage to protect or prolong your total retirement porfolio.