How long until your children need your financial help? (Notice I didn’t ask “if”)…

-Estimates of over 31% unemployment…6 million new unemployment filings last week…

Some Parents have significant reasons to let their kids flounder. Others? We want to be prepared to be in a good place for this emergency to help those we love. Either way, our retirement is safer with THEM living in THEIR home.

SOURCES:

Savings, investment accounts, etc.

+typically easy access

+You had no need for it (and it has been rolling over each CD maturity since the late 70’s)

On the other hand…

-Tax ramifications

-Withdrawal penalties

-personal wealth is either a backup or lean-on. sacrificing it may jeopardize your retirement.

-Down markets compel liquidations at substantial losses, and may also jeopardize your future retirement.

-Losses from liquidating Qualified funds are not tax-deductible.

 

Refinance, or local “Bank” HELOC (10 yr platforms+20 yr amortization)

+80% credit lines

+80% refi on debt to value

+Bank HELOCS have an “interest-only” option for 10 years and usually a minimum guaranteed rate for a couple of years

On the other hand…

-Declining property values nationwide may make it difficult

-Compulsory and mandatory payments for DECADES.

-After the loss of a Spouse, income is half; payment is the same

-Bank HELOC amortizes into a 20 yr Principal & Interest payment at the end of yr 10

-Mortgage interest schedule eats up THOUSANDS of dollars of your home equity

-REFI fees eat thousands of dollars of your home equity

-When the last Spouse dies, assets may be tied up for months or years while the family struggles to keep up with mortgage expenses.

-Probate court must release the home (in absence of a trust) to the family representative before it may be listed for sale

 

Life Insurance cash value

+Non-recourse

+Tax-free

+Can be pledged as collateral to secure other debt

On the other hand…

-Takes decades to develop cash value, Hours to spend it

-Ins Co may delay payment for up to 6 months (State law)

-Using Cash Value reduces the death benefit until repaid

-Making repayment may be problematic

-Ongoing insurance premiums to sustain the contract

 

FHA HECM-HELOC Reverse Mortgage

+Non-recourse (Payments are voluntary, if at all)

+No payments are required during the Borrower(s) life

+Immediate access w/o delays

+Lender pays late fees to Borrower

+No “closing points” like conventional lending

+Federally Insured to protect the Borrower

+HELOC can never be canceled, suspended, or reduced

+HELOC will add new equity DAILY as long as equity is available in the HELOC at the annual mortgage rate/360

+Equity growth rate is higher than most investments and is also federally insured safe

+No prepayment penalties

+Generally, unnecessary to refinance saving you THOUSANDS of dollars in refi costs

+When a Spouse Dies? No payment due

+When the LAST spouse dies? Nothing bad happens. The family has 30 days to notify the Lender the last parent has died. The lender will grant 90 days to resolve the lien, then another 90, and another 90, and another 90. NO PAYMENTS are required during the settlement period.

+HELOC may be used as an income substitute to protect investments from the “Sequence of returns” risk to the portfolio. This means no withdrawals during down markets are needed to meet the income needs of the retiree’s

+Accruing HECM mortgage interest may be useful and solve Medicaid Spend-down liquidation. The larger the debt? The more assets the Retiree can legally shelter.

+ A reverse mortgage reduces your debt-to-income ratio by the percentage the previous mortgage payments took. If Mortgage was the only debt? D-T-I ratio is ZERO. New debt may be assumed without jeopardizing the budget.

 

-??? If you can find legitimate “negatives” to this strategy? I invite your comments.

Using an FHA HECM HELOC to access your home equity is the safest strategic way to help your family during this trying time. Dig your well BEFORE your family thirsts”…Call me 808-464-5292