Estate Planning and HECM
When we think about the future, we often imagine the benefits of retiring to spend time doing the things we like, enjoying hard-earned rewards and no longer having to worry about Monday morning meetings. What’s less fun to think about is the aspect of planning for what happens as we continue to age, and how we will invest in our future as the decades go by. The American Association of Retired Persons (AARP) notes that 58 percent of boomers (ages 53-71) do have estate-planning documents, but that many “haven’t gotten around to it.”
Some may not see the benefits of estate planning, especially if they don’t plan on leaving their possessions to heirs or children. However, it’s never a bad idea to consider potential financial options for unexpected changes in lifestyle or health as people age, and for some it makes sense to include a Home Equity Conversion Mortgage (also known as HECM) as part of their estate plans.
The Home Can Bring Liquidity Back to Unexpected Ailing Accounts
Homeowners may not consider themselves wealthy, but their homes can serve as important financial leverage if they need or want extra funds as they age. Many retirees or aging homeowners know that they don’t plan to move from the home where they’ve built a life and made significant financial and emotional investments. For these homeowners, it may be worth planning to initiate a HECM if their liquid assets fall below a certain range.
Only individual homeowners (with their financial advisors’ assistance, if applicable) can decide on the right time to put this plan in place, but knowing that the homeowner can receive fixed monthly payments for as long as they live in their homes can bring peace of mind to those that want to plan for the future but aren’t sure exactly what their needs or funds will be.
And, because the lenders offering the HECM do not own the title to the home, it’s still possible to will the house upon death to an heir, who will have the choice to keep the home and pay back the loan, or sell the home on the open market (with the intent to pay back the loan with sale proceeds).
If you’re interested in learning about whether a HECM is right for you, contact us at Open Mortgage to talk about your options.
Things to know about Reverse Mortgages:
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment