Three Ways a Jumbo Reverse Mortgage Can Help Boost Retirement

If you have a high-valued home in a competitive real estate market, you may assume that you are not the typical reverse mortgage borrower. In fact, the Federal Housing Administration sets a lending limit for the reverse mortgages it insures at $625,500. But there’s a specific type of reverse mortgage available that can help borrowers access their home equity beyond that limit: a “jumbo” reverse mortgage.

Even if you don’t feel you need a windfall right now, a jumbo reverse mortgage can be used as a strategic tool to boost your retirement and, in some cases, act as a safety net for the future.

Jumbo reverse mortgages are for people 62 or older who have a sufficient amount of equity in their home, but for which their home value exceeds the federal lending limit of $625,500. People who apply for jumbo reverse mortgages often use the loan as part of a comprehensive financial strategy to help them plan for retirement.

Because jumbo reverse mortgages aren’t usually used when homeowners are in dire straits, the homeowner may have more flexibility when it comes to strategizing on how the loan proceeds are used.

Here are three ways a jumbo reverse mortgage can help retirees.

To protect investments

One approach for those who are eligible for a jumbo reverse mortgage is to look at it as something you can tap into to avoid losing money if the market isn’t doing well.

According to *All Reverse Mortgage’s calculator with a property value of $2,000,000 a federally insured reverse mortgage reaches maximum available proceeds of $421,000 where a jumbo proprietary option produces an available loan of $880,000 over double the amount available under the federally insured home equity conversion mortgage program.

The downside is that the jumbo reverse mortgage only offers a single lump sum disbursement where the federally insured reverse mortgage provides more flexible payments such as an open line of credit.

*Commercial site. This was the only calculator available online which allowed for a comparison of both federally insured and jumbo programs without being required to input your personal and private information.

To manage healthcare costs

Health care costs continue to rise year over year, and even if you have a sufficient amount of cash in your various retirement accounts, one illness or accident could have the potential to derail your retirement altogether.

Most people don’t think about tapping into their home equity until it’s too late, but if you can tap into it earlier when you are healthy, you won’t be as stressed out if a financial burden relating to your health does come up. The proceeds from a reverse mortgage can be used for any purpose, and if you can make a backup plan and secure a jumbo reverse mortgage even if you don’t necessarily need it, you may be able to avoid some potential hardships.

To supplement Social Security

 Another way to boost your funds in retirement is to defer drawing on your Social Security for as long as possible. This is because for each year after you are eligible to collect Social Security and don’t collect it, the amount you can receive increases by approximately 8%. Even if you hold out on collecting Social Security for a few years after you retire, you can drastically increase your payments.

This is where a jumbo reverse mortgage could come in. If you take out a jumbo reverse mortgage and use the funds when you need them, those funds from the loan may offset the payments you could be collecting from social security benefits and leave you with a higher amount in social security benefits down the road. Many retirees have successfully used a reverse mortgage to “bridge the gap” between their working years and claiming Social Security so that they can maximize their benefits.

If you would like more info on how to strategize for retirement using a jumbo reverse mortgage, contact a reverse mortgage professional or your trusted financial adviser who can help advise on your particular .situation

How to Use a Reverse Mortgage to Your Advantage

One of the most common fears that people harbor as they near retirement age is that they will not have enough money to maintain their lifestyle after they stop working. With the volatility of the stock market and the uncertainty of other investments, it’s easy to understand why some workers are concerned that they won’t recoup recent losses before they are ready to retire.

If this sounds like you, the best option you have is to step back and review the whole retirement picture. That means going far beyond the performance of a particular mutual fund or other investment instruments and thinking about things from a more philosophical perspective.

The money you live on after retirement is the reversal of all the saving and investing you’ve been doing since you started working. Everyone understands that, but sometimes we get a narrow view of just what defines an investment at that point in our lives.

It’s easy to think that 401(k) accounts, IRA’s, bonds, or other cash investments are the only factor in our post-retirement income. But the fact is that anything we own could potentially represent a source of money for us.

That doesn’t mean that on your 62nd birthday you empty the house and have a massive yard sale, financing your trip to Ireland with heirloom jewelry. But it does mean that a high-dollar item that has held its value can be liquidated when you no longer want or need it, and that money can help cover your retirement.

What’s the single biggest item that most of us purchase? Typically, it’s our home. We pour money into a mortgage for as long as 30 years, then hold on to it in non-liquid form until we pass it on to our heirs.

This doesn’t mean you stick a ‘for sale’ sign in the front yard and move into some tiny cottage. Quite the opposite. You can retrieve some of the money you’ve invested in your home by taking a reverse mortgage.

Before you jump to conclusions about spending your kids’ inheritance or selling yourself out of your home, spend a little time learning more about reverse mortgages.

Reverse mortgages are a great tool to re-capture some of the value of your home instead of leaving it tied up. It allows you to avoid the old conundrum often associated with aging farmers. The agriculture world says that you live poor and die rich because you invest money into hundreds of acres of land, expensive structures and equipment, and the farmhouse itself, but never get any of that money back. After you die, the farm may sell for a shocking amount of money–none of which goes to you.

It’s true for homeowners, too. You build or buy a home that’s suitable to raise several kids, entertain friends, and host grandchildren for long summer weekends. You make repairs, increase energy efficiency, and update styles to keep a modern look. Then one day you’re gone, and the house is sold off to the benefit of your heirs.

That’s not to say we necessarily begrudge our children all the money that we have. Most parents are very happy to know that they can pass along a financial windfall. But it makes no sense to have a tidy sum going to the kids and grandkids someday when you’re struggling to pay the gas bill in that large house you built for family and friends.

Getting a reverse mortgage can help you avoid some potentially unpleasant decisions, too. Some people make bad choices with their retirement dollars. Maybe you have. And now that you’re running out of time to make up for it, it’s tough to swallow that you are going to lag behind on standard of living compared to co-workers who get their gold watch the same day you do.

Of course, one of the worst things you can do in life is to put all your attention into keeping up with the Joneses. What works for them may not be the route you want to go. But if you do find it uncomfortable to think that you haven’t made as much for your retirement as others have, it’s at least a beneficial yardstick to decide what to do next.

You can avoid the discomfort of this situation by looking at a reverse mortgage. It can be more beneficial at tax time, provide less worry for you, and insulate your money from some of the crazy things that can happen to investments.

Have you no morals?

I tweeted on Saturday about an article I read over at The Motley Fool. I am pretty frustrated with the article and think it is worthy content to bring up today. If nothing else, it should at least stir a little bit of controversy in the comment section below. You can find the full article here, but here’s a quick excerpt…

For many of the underwater homeowners in today’s market, paying down their mortgage isn’t really in their best financial interest. Particularly in states like Arizona — where mortgages are nonrecourse, meaning the lender can’t go after any of the homeowner’s assets other than the property itself — it makes little sense to continue paying a large mortgage on a devalued house when comparable rental rates are far below the monthly mortgage payment.

This article made my blood boil. Have you ever seen a ninja’s blood boil? It’s not a pretty sight. I totally disagree with hate this article for a few reasons…

First, and most important, it’s totally immoral. So you may be $100K underwater on your house. But if you can still afford the mortgage, you have every MORAL obligation to keep paying. To be clear, I don’t have an issue with someone walking away from their house if they have no ability to pay their mortgage (i.e. can’t put food on the table, can’t afford gas to get to work, have become unemployed, etc), but to recommend that people walk away, even when they can comfortably afford the mortgage is ludicrous. Sure it may not be illegal to walk away, but that doesn’t mean it’s the right thing to do. Just because your home decreased in value, doesn’t mean it’s acceptable to back out of your end of the contract. Remember, when you purchase a home, you VOLUNTARILY accept the risk that comes with it.

Quite a few people that commented on the article made comments like… “Banks screw us all the time, this is just our chance to get back at them.” Ummm excuse me? If you think that is an acceptable reason to back out of your mortgage contract than please do me a favor, quit reading my blog, and go read Im-A-Big-Dumb-Head.com. Now I’m not saying banks aren’t shady, ’cause we all know they can be, but why does that suddenly give you the right to be an equally douchtastic individual? This is such a juvenile thought-process, I can’t even comprehend why someone thinks this is a reasonable excuse. Yes banks can be evil, but you walking away from your home, makes you just as terrible.

The third and final reason I can’t stand this article is because it would cause the end of the world, okay maybe not the end of the world, but the entire economy would collapse if people actually followed this advice. A commenter said it best….

so let me get this straight…the plan is for people seriously underwater to just walk away…

…. followed by a further decline in home values……then those people who WERE just slightly underwater become seriously underwater….. but thats OK they can just walk away too…..

causing another wave of declining values….eventually even those that have equity will be underwater too….but thats OK they can just walk away with the rest of em……..

If people follow the author’s advice, the amount of foreclosures would skyrocket, thus causing a downward spiral in home values nationwide. An increase in foreclosures is NO BUENO in my opinion.

I have so many other things I want to say about this article, but instead of rambling on, I’d rather hear what you all have to say. Does anyone else find this article concerning? What do you think would happen if people actually started taking this advice? What matters more, your “best” financial interest, or your morals? Is there anyone out there that can try and make sense of how this could possibly be a good thing for America? Ugh, this article makes me depressed with humanity.