Tag Archives: Reverse mortgage

Does Your Retirement Plan Account For Your Own Cognitive Decline?

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

With retirement, it is important to consider how declining cognitive skills associated with aging will make it increasingly difficult to self-manage your investment and withdrawal decisions. For households where one person handles money matters, surviving household members will be especially vulnerable to making mistakes when they outlive the family financial manager. Developing a strong relationship with a trusted financial planner can help with both of these matters.

Full story at
https://retirementresearcher.com/does-your-retirement-plan-account-for-your-own-cognitive-decline/

Improving Retirement Income Efficiency Using Reverse Mortgages

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

Originally published at Forbes

Maintaining higher fixed costs in retirement increases exposure to sequence risk by requiring a higher withdrawal rate from remaining assets. Drawing from a reverse mortgage has the potential to mitigate this aspect of sequence risk by reducing the need for portfolio withdrawals at inopportune times.

An HECM line of credit provides a tool that can be used to mitigate the impacts of sequence of returns risk. Since 2012, this has been the focus of a series of research articles highlighting how the strategic use of a reverse mortgage can either preserve greater overall legacy wealth for a given spending goal, or can otherwise sustain a higher spending amount for longer in retirement.

Full story at
https://retirementresearcher.com/improving-retirement-income-efficiency-using-reverse-mortgages/

Using a Reverse Mortgage to Purchase a New Home

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

One option in the broader category of using reverse mortgages for debt coordination for housing is the HECM for Purchase program, which was started in 2009 as a way to use a reverse mortgage to purchase a new home. The government saw enough people using a more costly and complicated two-step process—first obtaining a traditional mortgage to purchase the home and then using a reverse mortgage to pay off that mortgage—and sought to simplify the process and costs.

Full story at
https://retirementresearcher.com/using-a-reverse-mortgage-to-purchase-a-new-home/

Replacing Your Mortgage with a Reverse Mortgage

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

Originally published at Forbes

After my recent overview of potential uses for a reverse mortgage, I want to go deeper on each item. The first set of options for a reverse mortgage uses the available credit more quickly, either to pay off an existing mortgage or to purchase a new home. With these strategies, it is possible to look at using outside resources to avoid borrowing more than 60% of the initial principal limit during the first year of the loan. Using outside sources could mean the difference between paying a 0.5% initial mortgage insurance premium, and a 2.5% premium. For a $500,000 home, that difference means $10,000 of additional costs for exceeding the limit.

Full story at

https://retirementresearcher.com/replacing-your-mortgage-with-a-reverse-mortgage/

What Can You Use a Reverse Mortgage For?

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

Originally published at Forbes.

Now that we understand how reverse mortgages work, we can go into greater depth on the potential ways an HECM reverse mortgage can be used within a retirement income plan. For now, I want to focus on the big picture categories.

Full story at
https://retirementresearcher.com/what-can-you-use-a-reverse-mortgage-for/

What You Should Know About Repaying a Reverse Mortgage

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

Originally published at Forbes

Repayment of a home equity loan balance may be deferred until the last borrower or non-borrowing spouse has died, moved, or sold the home. Prior to that time, repayments can be made voluntarily at any point to help reduce future interest due and to allow for a larger line of credit to grow for subsequent use. There is no penalty for early repayment.

Full story at https://retirementresearcher.com/what-you-should-know-about-repaying-a-reverse-mortgage/

Choosing Costs for a Reverse Mortgage

Posted on by

by Wade Pfau, Ph.D., CFA

Retirement Researcher Logo

Originally published at Forbes

The discussion of reverse mortgage costs has several moving parts. Which type of cost combination to choose depends on how you plan to use the line of credit during retirement. Let me reveal the punchline for the following discussion: Those seeking to spend the credit quickly will benefit more from a cost package with higher upfront costs and a lower lender’s margin rate. Meanwhile, those seeking to open a line of credit that may go unused for many years could find better opportunities with a package of costs that trades lower upfront costs for a higher lender’s margin rate.

Full article at
https://retirementresearcher.com/choosing-costs-for-a-reverse-mortgage/

Most homeowners think a reverse mortgage is a last-resort option. Here’s why they’re wrong

Posted on by

by Jessica Guerin

Reverse mortgages are traditionally thought of as a last-resort option for seniors who want to stay in their homes but have little resources and few options left. But research has proven otherwise.

https://www.housingwire.com/articles/48858-most-homeowners-think-a-reverse-mortgage-is-a-last-resort-option-heres-why-theyre-wrong

Researchers Say Reverse Mortgages Deserve A Second Look

Posted on by

by Jamie Hopkins

Forbes logo

What’s the deal with reverse mortgages? This question was addressed in a recent Housing Wealth in Retirement Symposium held on March 23, 2018, in Washington, DC. The event was co-hosted by The American College of Financial Services and the Bipartisan Policy Center. While the symposium took a broader look at housing wealth and retirement security, a constant theme was the role of reverse mortgages under the Home Equity Conversion Mortgage (HECM) program sponsored by the federal government. A key takeaway from the researchers and policymaker presentations at the event was that reverse mortgages are underutilized by seniors today and can help provide added retirement funding security to Americans when used appropriately.

https://www.forbes.com/sites/jamiehopkins/2018/03/30/researchers-say-reverse-mortgages-deserve-a-second-look/#6d9df9ca56b2