While many senior homeowners opt to relocate in retirement, they may be missing out on an opportunity to mitigate problems and best support their retirement, writes reverse mortgage proponent and financial advisor Jamie Hopkins in a Forbes column this week.
Presenting the historical landscape for home equity growth versus stock market returns, Hopkins, who is Co-Director of the American College’s New York Life Center for Retirement Income and an Associate Professor of Taxation at the American College, notes that those who purchase a new home outright in retirement “are essentially investing and locking up a lot of their wealth into one asset that does not provide great returns over time.”
With stock market returns in the range of 25% in 2017 versus home equity value gains that essentially mirror inflation in the long term, tapping into home equity via a reverse mortgage for purchase is a strategy that many homeowners could use, yet few know about, Hopkins writes. In oder to relocate, most either purchase a new home through a new mortgage or purchase a home outright—neither of which offer much benefit in the long term.
“…more seniors should consider putting some money down and financing a portion of the home with a HECM for Purchase, which is a variation of a reverse mortgage,” he states in the column. “This can mitigate problems on both sides by eliminating the requirement to make monthly mortgage payments and freeing up cash for other uses. Additionally, with less than 1 percent of seniors using a reverse mortgage, and even fewer using it to purchase a home through the HECM for purchase program, more seniors need to understand the program and its benefits.”
The column goes on to describe the HECM for Purchase product and opportunities to be gained among those who explore its use.