Financing Retirement, Retirement Planning

Market Volatility and Your Home Equity

As the stock market remains unpredictable, you may be feeling the pressure to liquidate invested assets — which may not be in your best financial interests. When feeling the financial pinch, you may also be considering selling your home or taking out a traditional Home Equity Line of Credit in order to monetize the equity. There may be another, more flexible way to ride out any stock market storms while allowing your investments to grow as the market recovers: A reverse mortgage.

In recent years, studies by respected financial experts — including the Center for Retirement Research at Boston College, researchers at Texas Tech University, and Dr. Wade D. Pfau, CFA® — have shown that older homeowners may have more financial security when using a reverse mortgage to access an important and often under-utilized retirement asset: home equity. For example:

• A reverse mortgage line of credit can be a great financial tool that you can use as a “rainy day fund.” You can leave it untouched when you don’t need it, but it allows you to be more financially prepared when you do need additional funds — such as when invested assets are under-performing. Best of all, it has a unique growth feature that you can’t get with a traditional home equity line of credit: The unused amount grows over time — regardless of any fluctuations in the market or your home value — giving you access to more funds as time goes on.*
• Or, you can choose to receive your funds as a steady stream of monthly advances¹ for as long as you live in your home. This can be a great way to supplement your retirement income, while you avoid tapping into your savings and invested assets.
• Or, you could choose to take your funds as a lump sum — in order to refinance your mortgage and/or consolidate major debt, so you can free up funds for other things.
• You can also take your funds as a combination of the above. And if your situation changes in the future, you can even change how you receive your funds.

As you probably know, a reverse mortgage has a flexible repayment feature: YOU decide whether you want to make monthly mortgage payments — and if so, how much; or make no monthly payment at all. (As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, maintenance and any homeowners association fees).

If you have concerns about stock market volatility and how it may impact your retirement accounts, we encourage you to speak with your financial advisor. 

To learn more about how a reverse mortgage could help you ride out any dips in the stock market by accessing your home equity, please contact us today! 

*If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.

¹Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.

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