Reverse mortgage replaces retirement fund withdrawals

“These clients had a healthy financial profile, with good retirement income from retirement account distributions and a moderate mortgage payment. However, with the decline in the stock market, the value of the investment account had dropped considerably, with the result that funds being removed from the account represented a higher proportion of the account value . ... The clients also wanted to access equity to do some home remodeling, as they had lived in the home for many years without doing many updates along the way.”

Mortgage broker: John Holmgren, Holmgren & Associates.

Property type: Single-family home in Carmel.

Property value: $2.75 million.

Loan amount: $1.578 million.

Loan type: HomeSafe jumbo reverse mortgage credit line.

Backstory: These clients had a healthy financial profile, with good retirement income from retirement account distributions and a moderate mortgage payment.

However, with the decline in the stock market, the value of the investment account had dropped considerably, with the result that funds being removed from the account represented a higher proportion of the account value. This reduction in the account principal would result in a reduced increase in account value when the market turns around.

The clients also wanted to access equity to do some home remodeling, as they had lived in the home for many years without doing many updates along the way. In this case, a jumbo reverse mortgage credit line served a number of purposes: distributions from the retirement account could be reduced to just the amount of the minimum required distribution (with additional funds coming from the new credit line), cash flow could be improved because of the elimination of the mortgage payment, and funds could be accessed for home improvements without further reducing retirement funds (and without an increased mortgage payment).

Jumbo reverse mortgage products have been curtailed in recent months because of unstable conditions for these products in the U.S. credit markets, with several major reverse mortgage providers exiting the business or merging with other entities. So, while the loan amounts available for these reverse mortgage products have been reduced in this case, the homeowners were still able to put a line of credit of over $1.5 million in place, an amount that is well above their anticipated needs.