Do you have clients thinking of pulling out of equities due to bear market fears and volatility? A HECM “reverse mortgage” stand by line of credit can provide security that keeps them invested during trying times.  

Any advisor that has served clients through the uncertainty and volatility of a prolonged bear market. Have seen a portion of their clients pull fully out of equities to the detriment of their financial plan and long-term financial security. I personally know several individuals that pulled completely out of markets after the 2008 fanatical crisis and never returned. Several of these are clients of mine that have completed a reverse mortgage. They fortunately saw their real estate value rebound and surpass the value they had prior to the 2008 housing bubble. Unfortunately, they did not get the benefit of seeing their stock portfolio fully recover and accede their losses because they sold their equities at or close to the bottom of the market, and were not given.  To add insult to injury, the low interest rate environment that prevailed for more than a decade made investing in instruments like bank CDs basically moot. 

After thinking of all of my clients that approached me for guidance concerning a reverse mortgage after their retirement resources had languished with little or no return for years. I started to ask myself a question. Would these clients be better off today if they would have leveraged a reverse mortgage during the down years of the economic cycle and held on to their equites in order to see them recover? I believe the answer is yes. Data that I am including from renowned retirement income researcher and author Wade D. Pfau, Ph.D., CFA, RICP(R), is the program director of the Retirement Income Certified Professional(R) designation and a Professor of Retirement Income at The American College of Financial Services in King of Prussia, PA. As well, he is a Principal and Director for McLean Asset Management helped me come to my conclusion. In the scenario that he lays out. In his book “Reverse Mortgages how to use reverse mortgages to secure your retirement 3rd edition-revised for 2022” In the section titled “Reverse Mortgages and the perfect Storm Facing Retirement Income in 2022” A client with 1 million invested in 1962 completes a reverse mortgage. The client lets the reverse mortgage line of credit stand by and grow until the market downturn of 1970, 1974 and 1975. In these years the client runs on the cash flow feature of the reverse mortgage while stopping distributions from their retirement portfolio. By using this strategy the sequence of return risk would have a portfolio valued at 2.25 million in 1995. The client that stays invested and maintains distributions during these down has a portfolio balance of “0”. All of this assumes a 3.95% withdrawal rate from the client’s portfolio. 

In closing, all of your clients have heard the following statement through the years. “Don’t panic sell during downturns in the market stay invested! However, we all know that this logic can and does go out the window when the bear is scratching and clawing at the front door. Many of your clients may have been disciplined and or fortunate enough to have put back enough cash to use during down market cycles. I would dare to say that most advisors have just as many or more clients that have not. Many people solely depend upon qualified IRA or 401K account balances that they accumulated in their working years. For these clients I believe the standby line of credit reverse mortgage strategy deserves a hard look.    

A sharp rise in home values, combined with a shortage of single-family homes and rising rent prices, has driven up home prices around the country, leaving senior homeowners with more than $11 trillion in home equity (according to kiplinger.com). If seniors are having trouble meeting expenses and want to downsize their housing costs, there are few options that are cheaper than their current housing situation.

If you’re planning to downsize or even stay in your home, you can tap that equity and take out a reverse mortgage line of credit. Some seniors are using these loans as a financial-planning tool, so they can leverage the equity in their homes on their own terms. 

If you’re over 62 and have equity in your home, you can use a reverse mortgage to pay off your underlying primary mortgage using the equity built up in the property and then borrow a portion of the remaining equity — either as a monthly payment, lump sum or line of credit that will continue to grow over time, as long as you maintain an available balance. The amount you receive is based on the current interest rates, age of the youngest borrower, and the appraised value of the home combined with the lending limits set by HUD. 

“You’re not giving up the house,” says Wade Pfau, the author of a book on reverse mortgages. “If you sell and pay off the loan balance, everything left over is yours. If the loan value exceeds the sale price, you’re not on the hook to pay back more.”

There are many uses for a reverse mortgage. Some include creating more cash flow for paying every day expenses, paying off high-interest credit card debt, more cash flow to invest in the retirement lifestyle you desire, investing in home improvements to make your home safer, and/or building a medical financial plan in case you need long-term healthcare. 

And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. “If you have parents that are aging and worrying about bills and making ends meet, you need to sit down with Nathan and discuss the reverse mortgage options. This may be a perfect fit for you and your parents. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call…  You will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help,” said client Rita Trammel. Call Nathan today to see how a reverse mortgage can help fill in the gap of retirement shortfall while property values are still high. (423) 624-3878.

Last month, our president Nathan Guerrero had the opportunity to be on Let’s Chatt and talk more about the reverse mortgage industry. Watch our interviews to find out more about our clients, the common misconceptions from clients, and how clients use the reverse mortgage loan to benefit their lives.

Watch the episodes here:

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April is Financial Literacy Month. Why is this important? Financial literacy is key to understanding how to save, earn, borrow, invest, and protect your money wisely. It is also essential to developing short- and long-term financial habits and skills that lead to greater financial well-being. Simply put, financial literacy is not just about the money you are spending, it is about the smart choices you are making every day and having a planning-forward focus. 

• The most important part of Financial Literacy is having a plan. It can be overwhelming to learn all the “financial jargon” when it comes to managing your money. The most important part is to make a plan about your finances. Look at expenses that will continue after retirement and what will be reduced after retirement. 

• Track what you spend and how it makes you feel, so you can decide what’s worth it to you and what’s not. Shift your spending toward what makes you truly happy – slaying debt, savoring a treat, helping a friend, or investing in an experience.

• Focus on what you can control. Unfortunately, there are a lot of things that are out of your control when it comes to money. For example, you cannot control how the markets perform, a pandemic, or even how long recessions last. However, there are things you can control. For example, you can control things such as the amount of your monthly contributions, your spending habits, the investment and account management fees you are paying, and even the type(s) of insurance you have in place to protect your family and your financial security.

• Start with small, manageable changes and celebrate milestones along your journey! When considering how your money can help you meet your physical, social, and emotional needs, break goals into bite-sized pieces which are easier to form into habits. 

• Consider using your home equity. At Mortgage South, we are committed to helping you find the best solution for your financial needs. When it comes to making decisions about your retirement goals and objectives, we want to show you how you can make the equity in your home work for your retirement needs.

We are introducing a new slogan to Mortgage South- Local. Trusted. Committed. In this blog post, we wanted to show the meaning behind this new slogan and why it means so much to our company.

Local- In 1993, we completed the first reverse mortgage in the state of Tennessee. Over the years, we have helped nearly 2,000 homeowners like you put the equity in their homes to work for them. We now offer reverse mortgages in Georgia and Tennessee. Nathan Guerrero is our reverse mortgage specialist and President. As a native of the North Georgia and the Chattanooga area, he’s been helping homeowners with reverse mortgages since 2005. “Nathan Guerrero is the best. I began my journey with a company in California. I became uncomfortable and began looking locally and Nathan came highly recommended. I was not disappointed. He was able to provide me a lower interest rate than the one promised from California as well as a lower origination fee. He also has not disappeared from the scene after the closing. He has made himself available to answer any questions or deal with any problems that might arise. I am completely satisfied.” -Pam Humphrey

Trusted- Seniors throughout Chattanooga and North Georgia know that Nathan is a honest, straightforward expert in his industry. He originated loans with some of the largest lenders in the industry, and his experience has given him a wealth of knowledge and resources. “Nathan is a trustworthy, knowledgeable professional who will give you solid advice and guide you in the right direction when using this form of mortgage. Please call him and let him rid you of the misunderstandings of this industry. Again trust him for advice for your parents and using the equity in your home!!!!” -Emma Carpenter

Committed- We are committed to excellence and making sure we are by your side every step of the way in the Reverse Mortgage Process. Our most important purpose is to build long-lasting relationships with our clients to ensure happiness and security in your financial and personal future.

We are also committed to the industry. As other lenders have transitioned in and out of the reverse mortgage industry, Mortgage South has stayed steadfast and committed to our community and clientele.

“A little research led me to Nathan and Mortgage South. Nathan got me locked into a much lower guaranteed interest rate and lower origination fees. I have a Masters Degree in Engineering and really crunch the numbers when faced with something as important as a reverse mortgage. Nathan was very patient and fed my thirst for data, analysis and answered endless questions. We found a way for me to save significant taxes and lower my borrowing cost. Nathan was always available by phone often working late at night from home. He is very professional, knowledgeable and most importantly very honest and trustworthy. I can not say the same about the big national NY and CA companies. Call Nathan at Mortgage South for personal and professional service.” Larry Parker