A Certified Financial Planner (CFP) recommends that for homeowners looking for a fast source of cash during the coronavirus pandemic, home equity – and specifically a reverse mortgage – could be an avenue worth exploring.
This is according to Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners in Long Island, N.Y. to personal finance reporter Greg Iacurci in a new column at CNBC.
“Homeowners can tap a home-equity line of credit or reverse mortgage, or consider cash-out mortgage refinancing, especially with interest rates so low,” writes Iacurci based on Levine’s input.
While homeowners have options beyond a reverse mortgage including a cash-out refinancing transaction, reverse mortgages can provide seniors with a plausible path toward accessing their home equity if not determined to seek out another alternative, Iacurci says. A cash-out refinance also has the potential to “drag out loan repayment for decades,” he writes.
“A reverse mortgage is only available to those age 62 and older,” writes Iacurci. “It’s a type of non-recourse loan, meaning borrowers would never owe more than the value of their home. There are risks — for example, similar to a traditional mortgage, lenders could foreclose on a home if borrowers don’t keep current with property tax and maintenance.”
Alongside a reverse mortgage, other options that can be leveraged to access cash during this time can include margin loans to borrow against the value of their taxable investments, according to input from Charlie Fitzgerald, principal of Moisand Fitzgerald Tamayo in Orlando, Fla.
Taxable investments can also provide a source of income, Iacurci writes.
“When it comes to taxable investments, consider selling fixed income (like bonds) and cash-equivalents (such as money market funds) before stocks, which are likely trading at a steep discount given the recent market selloff,” he says. “Those who sell investments with a net gain will have to pay capital-gains taxes. Those who sell at a loss could benefit from tax-loss harvesting.”
This is according to the input of Stephen Rischall, co-founder of Navalign Wealth Partners in Los Angeles, Calif.
Read the article at CNBC.