What Financial Planners Should Know

What Financial Planners Should Know

A Reverse Mortgage is “…a way to provide a steady stream of tax-free cash flow that can last the rest of a retiree’s life.” — Wall Street Journal, June 16, 2012

Any financial advisor who does not fully understand the process and possibilities of today’s reverse mortgage may be leaving an important retirement tool on the table. The dire picture of the reverse mortgage as a last, desperate measure has been replaced by a financial option that allows one to be financially independent.

A reverse mortgage can be a valuable tool for financial planning. Also known as a Home Equity Conversion Mortgage (HECM), the reverse mortgage has evolved to become a safer, more flexible option for seniors of all economic strata. In many cases, financial planners use funds from a reverse mortgage to cover immediate or unexpected financial needs (such as unforeseen medical bills or home repair costs) while preserving a client’s core savings and investment portfolio.  The reverse mortgage line of credit is an excellent approach to create a rainy day reserve to access funds at a later chapter in life.  For many, having access to hundreds of thousands of dollars is a comforting option to augment existing retirement funds.  

The Reverse Line of Credit

A new concept in financial planning, the reverse mortgage line of credit is created by converting a homeowner’s illiquid “disregarded” home equity into accessible tax-free cash if or when needed with no required monthly principal or interest repayments. We’ve nicknamed the reverse mortgage line of credit the R-LOC.

In essence, an R-LOC provides a new source of tax-free cash if desired or as needed. The cash can be received as a lump sum, a monthly check for life, and/or as a line of credit that may be accessed at a later date. All this without giving up control or ownership and, most importantly, providing the option to never again make a monthly principal and interest mortgage payment.

The R-LOC is a way to provide a ready source of tax-free cash without disrupting or interfering with current retirement plans. By tapping into the unused equity in the home an R-LOC helps to build a financial cushion that can be used for unforeseen expenses or unexpected opportunities.

An R-LOC also benefits the financial planner by allowing you to help your clients continue to grow investments and savings while also providing tax-free cash when needed or desired, all without diminishing portfolio value by tapping into retirement savings.

Direct Finance Corp. can help financial advisors gain the knowledge necessary to present this important option to clients. We have worked with many financial planners, elder law attorneys, and certified public accountants to help make a reverse mortgage an important part of the overall financial plan for their clients.  

Please note that Direct Finance Corp. does not and will not give financial investment advice or recommendations.  You are encouraged to consult with your trusted financial advisor. in addition, you will be given a specific disclosure identifying the potential conflict of interest and risks of utilizing reverse mortgage loan proceeds for any type of investments.

Let us help you better understand the reverse mortgage process. Call us today at 877-499-7283.

What Financial Planners Should Know

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