The Line of Credit in a HECM is Powerful as a Retirement Planning Tool – There is no financial product that has as many valuable features that are so well designed for retirement planning! Managed correctly there is no financial product that even comes close!
Investments should be viewed through the lens of “Safety, Liquidity and Rate of Return” The largest asset for most people is home equity. They brag about how the real estate market has gone up, dream about that home our parents bought for the cost of a car and is now worth a million bucks! But have you ever given thought about whether that Asset is 1) Liquid 2) Safe 3) and is earning a rate of return?
Home Equity is NOT Liquid – to get to use this asset you must sell or borrow. In either case you get to pay others to use your asset!
Home Equity is NOT Safe – consider what happened in the 2008 Financial crisis or what happens when your neighborhood becomes “Transitional” or is suddenly close to a major road. The equity you had can disappear quickly, through no fault of your own!
Home Equity does NOT Earn a Rate of Return – it is ZERO. Your home value goes up or down depending on market forces. The only way you can increase your equity is by using your own money to pay off a mortgage – the equity itself earns ZERO!
A HECM in retirement takes a non-liquid, unsafe and no return Asset and brings it to a useful life:
There are some sophisticated strategies in those 3 boxes, and likely require the use of other professionals and a strategic plan. However, there is no product you can buy anywhere that does what the HECM line of credit can do, at any cost.
You can learn more about the truths and realities of the HECM, by checking out our “7 Minute Reverse Mortgage Overview”