Are You Thinking of Paying off Your Home Mortgage?
If you have a traditional
mortgage and continue making payments, the balance would be paid down somewhat in
10 years which could deplete your cash or retirement funds.
If you pay off the balance now with the proceeds from an adjustable rate HECM,
in 10 years you will owe more because you have received the benefit of keeping the payments in your retirement funds. Which is least costly to use to make
your traditional mortgage payments: your retirement funds or reverse mortgage?
If the percentage of growth in
your retirement funds is more than the interest charged on the reverse mortgage,
you could preserve wealth by using the reverse mortgage funds. But an annual
premium of 1.25% for FHA mortgage insurance must be calculated in the interest
cost.
If the percentage of growth
of your retirement funds is less than the cost of the reverse mortgage funds,
using retirement funds to pay down your traditional mortgage debt is less
costly.
You will benefit from the
appreciation in the house in either case. But also consider whether you itemize
tax deductions. How much do you really benefit from the mortgage deduction? Or
do you take the standard deduction anyway? Unless you make payments on the
reverse mortgage, there is no interest paid so there is no deduction. Most
people do not make payments and interest ordinarily is not paid until the
borrower dies or moves out of the house, at which time it may or may not be
deductible.
If you are near retirement age and you are looking to build wealth and maximize cash flow, the HECM Reverse mortgage could be a perfect tool for you to use. Call Julia today at 502-426-7840 or visit her site at
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