Line of Credit Draws Offset by Growth
My 73 & 74 years young, affluent clients, Mr. and Mrs. K called me
to discuss the Reverse Mortgage. They really knew very little
but wanted to know more because of the change in their monthly
dividend income. Their dividend income had dropped by $2000.00 per
month due to the historically low interest rates.
The K's primary residence was free and clear and they have a second
home in Palm Springs, CA where they spend the holidays and golf
until early Spring when they return home. He and his wife have
planned and prepared for a very successful retirement. However, the
economic conditions have greatly impacted their lifestyle.
Because the K's did not want to invade their investment assets, they elected a Reverse Mortgage HECM program with the Line of Credit option.
This program offered the K's proceeds in the amount of $251,100.00*,
which they placed in the Line of Credit. They then took withdrawals
of $2,000* per month wired directly to their bank account.
Their Line of Credit option included a compounding growth rate of
4.011%*, based on their initial balance of $251,100*. After an
annual disbursement of $24,000* plus a growth rate of
approximately $10,000* the Line of Credit balance was approximately
$237,000.00*. The result: this year the Line of Credit growth rate
offset the withdrawal by more than 40%.
Needless to say, the K's are very, very happy with their choice and
feel confident that they made the right decision.
*This is an example that may not currently have the same criteria.
Results will vary based on borrower's age, current interest rates,
home value and FHA maximum limits. Ask me to quote a similar
scenario for you or one of your clients.
