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As of June 2024, 8.5% of all American homes were valued at $1 million or more.
That translates to 8 million homes, and in turn, millions of American families who joined the “millionaires’ club” thanks to the runaway success of the American housing market.
According to a recent survey from the American Advisors Group (AAG), more than 70% of American seniors say their home is their most valuable asset.
That same survey recorded that 75% of respondents said buying a home was the best financial decision they ever made.
It’s an interesting twist of fate that after years of hard work, after endless hours reviewing their stock portfolios and picking out the right bonds — that the very best investment they made was simply providing for their family and putting a roof over their heads.
But even though many retirees have become wealthy through owning a home, this kind of wealth isn’t exactly liquid…
After all, most homeowners don’t cash in on their real estate gains until they sell the property. But you’re not going to sell the place as long as you’re living there. So many American retirees are becoming increasingly real estate rich and relatively cash-poor by comparison.
Reverse mortgages have recently emerged as an alternative solution for dealing with this issue. A reverse mortgage allows Americans aged 62 or older to convert a portion of their home equity into cash, income, or a line of credit.
As the name implies, you’re essentially “reversing” your mortgage. You’ll no longer have to make payments, and you’ll start cashing out equity instead of growing it. (You will still be responsible for property taxes and other costs).
If you can find a reverse mortgage contract where the costs and interest rate work for you, then it can be a great way to enjoy the benefit of the equity you’ve worked hard to build over time, and without having to sell your home to do it.
Take Julius and Diane, for example. They were an older couple living in a quiet suburb of Chicago when they first contacted a colleague of mine. Like so many others in their generation, they’d bought their home young, never moved, and were now millionaires (at least on paper).
They could’ve sold on the spot and retired to Florida, but they didn’t want to. They loved their home, and they never had any intention of moving out, but healthcare costs were straining their fixed pension income, and years of home renovations had piled up on Julius’ “honey-do” list.
They’d recently finalized a reverse mortgage loan, and were looking forward to the coming cash windfall. The very first payment from their reverse mortgage went to fixing up the old porch and installing a handrail to ensure they wouldn’t slip and fall on those icy winter mornings.
For the first time in years, Julius and Diane felt like they weren’t struggling just to keep up with expenses on their limited budget.
Of course, they were also realistic about the long-term commitment they’d just made. They realized that upon their passing, the balance of the reverse mortgage loan would come due. Their heirs would have to choose between paying off the loan to keep the house, selling off the property immediately, or walking away and letting the lender keep the deed.
On the one hand, Julius and Diane didn’t think any of their kids really wanted to move back into their old house. At the time, their neighborhood wasn’t exactly trendy.
But they also realized that their reverse mortgage loan would make the estate process more complicated and more costly — which would risk putting more pressure and strain on their children during one of the toughest times of their lives.
Fortunately, Julius and Diane both had substantial whole life insurance policies.
Whole life insurance can be the perfect tool for maximizing the flexibility and utility of your reverse mortgage. Because your policy’s guaranteed death benefit means that your heirs will receive a substantial cash payout just as the reverse mortgage loan is coming due.
So instead of rushing to resolve family affairs, your heirs suddenly have options. It’s no longer a challenge of whether they can even afford to keep the hold home, and instead it’s a question of whether they want to or not…
They can choose to keep the cash and walk away from the deed with minimal effort. Or they can pay off the balance of the loan and hang onto the property if it seems like a valuable investment. They can even use the remaining portion of the cash death benefit to rehabilitate and remodel the house if they so choose.
Without whole life insurance, heirs may be forced to sell off other inherited assets (or even dip into their own savings) to pay off a reverse mortgage. The cash payout from life insurance can prevent that, protecting other assets from liquidation and ensuring they continue to grow and compound.
Julius and Diane communicated their financial plans to their heirs years in advance, so they all had peace of mind and were prepared when the day finally came. The kids ultimately chose to keep the old family house, remodeling it and putting it back on the market in what had recently become a fast-growing neighborhood.
The property is now a steady source of rental income, with proceeds being paid into a shared family college fund for the next generation.
A reverse mortgage is a powerful tool for accessing your wealth today, taking advantage of a soaring real estate market and making the most out of your golden years. Yet just like any other loan, a reverse mortgage is a liability on your balance sheet … at least, until you combine it with whole life insurance…
When you combine a reverse mortgage with a well-structured, paid-up whole life insurance, the result is a powerful and flexible legacy-planning tool that can ensure that one of your most valuable assets (your home) provides not just shelter, but direct financial benefit to multiple generations.
Ready to see how this could apply to your wealth plan? Click the big yellow Clarity Call button and let’s map it out together.
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