New Math on Reverse Mortgages with Tim Oddo
Reverse Mortgage Division
Call or Text: 303-233-4500
Hi there, I’m Tim Oddo, Reverse Mortgage Specialist. Today, I want to look at a powerful feature available within a Reverse Mortgage – the Line of Credit. I want to address some long held misconceptions in the financial and retirement planning professions. For decades now, many financial advisors have looked at reverse mortgages as a loan of “last resort” once all other resources have been exhausted. Their thinking was that a Reverse Mortgage was meant for those clients who didn’t properly prepare for retirement.
Well…a lot has changed in the past several years and since 2013, the federal government through the Dept of Housing & Urban Development (HUD) has refined the program and added some much needed safeguards. These changes have led many financial and retirement planning professionals to change their minds on when and how to use a Reverse Mortgage for not only retirement planning but as a real retirement income tool. Now it’s important to understand that the crux of these changes was to encourage responsible use of a Reverse Mortgage that helps to create a sustainable retirement income strategy.
Here’s the Big Idea…we all understand that retirees have a series of expenses they need to be able to support and that these expenses require a certain level of cash flow to accommodate. Most retirees come into this time of their life with 2 primary income sources: Social Security and an investment portfolio. I want to show you a viable and under used 3rd option today…that’s the Reverse Mortgage line of credit. This line of credit is unique because you can establish it early on whether you need the money immediately or not…and then it can be used for when the need arises, or to protect savings or to even increase your monthly cash flow in retirement. Due to the way the Reverse Mortgage line of credit is set up, the unused portion of this line actually grows and has a built in guaranteed growth rate every year. This built in credit line growth has some powerful functionality behind it:
First: It allows the Senior to coordinate draws responsibly between their investment portfolio and their Reverse Mortgage. So a homeowner can borrow funds as needed from their line of credit rather than drawing down on their investment portfolio funds during a bad stretch in the market. By borrowing from the line of credit only when needed, it allows your investment portfolio a better chance to recoup losses when the market goes back up again. The Reverse Mortgage line of credit when used responsibly provides a buffer asset during market declines…So this helps mitigate risk and creates more potential income and/or pass on more legacy to your estate.
Second: The potential benefit from opening this line of credit early on in is that it allows for the unused portion of the line to grow throughout retirement. This gives the Senior many options down the road to draw against it not only for income but perhaps for home health care or some other retirement need. And best of all a HECM Reverse Mortgage is an FHA insured non-recourse loan, meaning if you ever owed more than the value of the home – then you are not responsible for any amount above that home’s value because of the federal insurance.
As the Gov’t and HUD continue to strengthen the rules and regulations for Reverse Mortgages, the role for this loan will continue to grow. Most of the criticisms for this product have persisted for decades and reflect a short-sighted view or just a general lack of understanding of what this powerful and flexible loan program can actually offer.
Bottom line is this…a properly used Reverse Mortgage can support a more efficient retirement income strategy because it creates liquidity out of an otherwise illiquid asset. Please feel free to share this video with someone you know who may have questions, or call me to discuss in more detail. Thanks again, Tim Oddo 303-233-4500.
Meet Tim Oddo:
“Let’s get it done!” This is the approach Tim uses in each of his client interactions. This philosophy coupled with honest transparency is what has sustained his career in the mortgage industry for almost two decades. Tim believes that strong communication, a quick response time, and an honest assessment of individual client needs allows for the best experience for his home buyers. Before his career as a loan officer, Tim worked as an appraiser, which gives him practical insight into other areas of the mortgage process. Besides work, Tim serves on the board of A Chosen Generation and is long-time member of Kiwanis Club. These affiliations align closely with his passion for people and building strong relationships with each person he encounters.