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Home - Santa Fe Real Estate Guide - - THEMASTERGARDENERS THEREVERSEMORTGAGE - Let’s talk re­tire­ment DIRK GRAY

The vast ma­jor­ity of us in our late 50s and early 60s, be­gin con­sid­er­ing what re­tire­ment is look­ing like, and of­ten it’s bleak, so we scram­ble and hope­fully in­crease our re­tire­ment abil­ity. A re­verse mort­gage may serve as both a re­tire­ment tool and give the bor­rower a level of fi­nan­cial liq­uid­ity and flex­i­bil­ity. You con­vert a per­cent­age of your home’s eq­uity into tax-free cash, as a line of credit, a lump sum, a monthly pay­ment, or a com­bi­na­tion of the three.

When con­sid­er­ing a re­verse mort­gage, you need to move me­thod­i­cally, and make sure you un­der­stand the dif­fer­ent choices avail­able to you. The U.S. De­part­ment of Hous­ing & Ur­ban De­vel­op­ment (HUD) de­signed a coun­sel­ing por­tion to en­sure a level of un­der­stand­ing. Un­like a reg­u­lar mort­gage that re­duces over time, be­cause you’re mak­ing monthly prin­ci­pal and in­ter­est pay­ments, a re­verse mort­gage gets larger. Why? You’re be­ing charged in­ter­est and mort­gage in­sur­ance (HUD– FHA in­sured loan) on your re­verse mort­gage’s out­stand­ing bal­ance. You may make a monthly pay­ment on a re­verse mort­gage, but the ma­jor­ity of bor­row­ers choose not to. They want to re­main in their homes and don’t want to make prin­ci­pal and in­ter­est pay­ments any­more.

The 65-plus pop­u­la­tion in this coun­try is grow­ing at a rate of 10,000 to 11,000 daily, and our life ex­pectancy has in­creased – the world is get­ting “grayer.” That mean­swe need to fig­ure out how to find a solution to our new re­al­ity. Do we work longer or try to save more of our in­come? For many, these op­tions are not a fea­si­ble solution.

If we re-think how we look at our homes, it may open another pos­si­bil­ity. Now we see our house as part of our legacy, which is won­der­ful, but we need to see it as an as­set – and it may be your largest as­set. Now it’s not just your re­tire­ment sav­ings or re­tire­ment pen­sion: your home may be the an­swer to your re­tire­ment dilemma.

If you are working with a fi­nan­cial plan­ner or es­tate-plan­ning at­tor­ney, she or he may have you con­sider us­ing your re­verse mort­gage for port­fo­lio co­or­di­na­tion, spend­ing home eq­uity first to lever­age your port­fo­lio’s up­side potential, or as a So­cial Se­cu­rity de­lay bridge.

No­bel prize-win­ning econ­o­mist Robert Mer­ton said, “The house is like an an­nu­ity: It pro­vides the hous­ing you need for as many years as you need it.” It will also pro­vide the foun­da­tion for fund­ing your re­tire­ment, so smile!

Dirk Gray is a re­verse mort­gage spe­cial­ist with Frost Mort­gage Lend­ing, and for 28 years was an ac­cred­ited in­struc­tor for the New Mex­ico Real Es­tate Com­mis­sion. He may be reached at 505-930-1953 or dirk_gray@frost­mort­gage.com

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