The Affluent Turn to Reverse Mortgages to Slow Down 401K Draws & The Myth Debunked, Again

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A fascinating article by the Wall Street Journal chronicles a trend that I too am seeing in my office: folks who own an expensive home free and clear, or have a small loan outstanding, coming in and establishing a reverse mortgage credit line to fund the upkeep of their home, their other monthly bills, and for travel. A couple of my clients just returned from cruises and have never felt more contentment in retirement as they do now, POST set up of a reverse mortgage credit line.

One comment universally expressed by all clients particularly caught my attention, and paraphrase: “We had to leave our beautiful home every day while we were working; now that we are retired we don’t want to move and down size, we want to fully enjoy our home, and yet, we want to do a little travel”

One goal also universally expressed by all: once the RM loan was complete, they were ceasing draws on their 401K’s beyond the required, all clients had monthly incomes, however it wasn’t quite enough for a comfortable lifestyle, thus they had been turning to draws on retirement funds.

Could they have continued to do so? Yes, however, by keeping future 401K draws to a minimum while the stock market is doing well, they would be allowing their 401K’s time to rebuild from the economic downturn. Increasing numbers of financial planners are recommending this RM credit line strategy as part of a 401k rebuilding plan.

Unfortunately I continue to need to debunk “the myth”. One of my clients reported back to me they were told, and I paraphrase, “You have now given the house to the lender”. This statement is incorrect: With any type of RM loan, the borrower(s) remain the owner(s) on title, thus the house is titled just like it would be with any other type of loan. And, just like any other type of loan, at the time the house is sold, by the borrower(s), or their heir(s), the RM loan is paid off and all remaining equity goes to the borrower(s) or their heir(s). As with any loan type, if home equity preservation is a goal, then borrowing modestly is advised.

Have questions? Call to schedule a private consultation or reserve a spot for my next monthly workshop: Thursday April 16th, 2015. Shawna McDonald Loan Officer, has successfully completed hundreds of reverse mortgages and is approved with 8 reverse mortgage lenders, ensuring clients receive low fees and great rates. (530) 497-3010. Her local office: Sierra Foothills Reverse Mortgage 412 E. Main Street Suite N, Grass Valley.                                                         The website is www.SierraFoothillsReverse.com.

The WSJ article referenced herein: “When Even Wealthy Homeowners Are Using Reverse Mortgages, The Question is: Why Aren’t You?” published on October 9, 2014.

The opinions expressed here are those of Shawna McDonald Copyright © 2015.     Shawna McDonald NMLS #271335 CA-BRE # 00585530 DBA Sierra Foothills Reverse Mortgage and Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ HUD approved lender.

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