A reverse mortgage could be a tool at the center of a financial strategy that could allow older Americans to build a bridge in their finances between their 60s and age 70, at which point they would qualify for higher Social Security benefit payments. This is according to a column published at ThinkAdvisor, based on a conversation with Reverse Mortgage Funding (RMF) Head of Financial Advisor Relations Christian Mills.
“Reverse mortgages, at least in Mills’ experience collaborating with financial advisors, are not commonly being used as last-resort strategies among the most cash-strapped retirees who have no other income sources apart from their home,” the column reads. “More often, a reverse mortgage is used as part of a carefully crafted financial plan, developed in collaboration with a certified financial planner or fiduciary advisor, to help mass affluent individuals achieve more lofty financial goals.”
Moving from the early 60s to age 70 with a reverse mortgage in-between is a particularly enticing prospect for mass affluent individuals in particular, Mills told the outlet.
“There is just a ton of wealth locked away today in home equity among the mass affluent,” he said to ThinkAdvisor. “Many people in this client segment bought houses 15 or 20 years ago for, say, $250,000, and they have since seen the value of their home climb by two or three times. That’s a huge asset, and it’s worth asking how you can tap into it without an outright sale of the house.”
In his own conversations, Mills says that the reverse mortgage tool is gaining additional traction among financial planners due to the current level of volatility in the financial sector caused by historic levels of inflation and macroeconomic instability.
“It is really appealing to think about taking income from your home equity rather than having to make withdrawals from the 401(k) plan when it is down 25%,” Mills said to the outlet.
At an event hosted by HW Media earlier this year, Finance of America Reverse (FAR) VP of Retirement Solutions Stephen Resch emphasized the importance of soliciting financial planners to help expand the scope of the reverse mortgage business.
“I’ve talked to financial advisors and I will ask them if they have ever considered reverse mortgages in their practice,” he said in April. “They usually say, ‘Well, no, those loan amounts are way too small.’ They’re not aware that there are proprietary products out now with loan amounts of up to $4 million. And just by educating them on the availability of these programs, we’ve secured multiple multiple transactions just because they are now aware of this.”
Read the column at ThinkAdvisor.