Home Equity Maximization

Situation 1:

  1. You have a client that is over the age of 62 and owns their home free and clear.
  2. They are concerned about monthly cash flow as their age climbs and their monthly costs rise
  3. They are retired, and live mostly on pension disbursements and other savings
  4. The client wants to access his equity without having to get into a new monthly payment

Solution:

You client is eligible for a Reverse mortgage. This reverse mortgage will allow them to capture a large portion of their untapped equity, tax free, and convert that into a Single Premium Immediate Annuity (SPIA). A SPIA provides an income stream for life based on a single deposit made to purchase the annuity, and your client’s age and health status. Your client can make gifts of the after-tax SPIA income to the ILIT. In turn, the ILIT uses those funds to purchase a life insurance policy on your client’s life for an amount that replaces or exceeds the value of the deferred annuity, to benefit heirs. Alternatively, the client may keep the deferred annuity and simply make withdrawals from it; however, these withdrawals may be subject to surrender charges or penalty taxes if taken prior to age 59 ½. Since the Client is over 62, no such surrender charge will be in effect.

Benefits:

  1. The client unlocks the equity from their home and creates a more comfortable monthly cash flow situation
  2. The client does not have a mortgage payment ever again

Considerations:

  1. Client(s) must be over the age of 62
  2. The property must be the clients primary residence

Situation 2:

  1. Your client is generally conservative in their investments
  2. Your client is concerned about leaving a legacy to their heirs that is safe
  3. Your client owns their home and lives in it as their primary residence
  4. Your client is over the age of 62

Solution:

You client is eligible for a Reverse mortgage. This reverse mortgage will allow them to capture a large portion of their untapped equity, tax free, and convert that into a Single Premium Whole Life Policy. This policy will give your client the extra benefit they desire, and because they are using funds from a reverse mortgage, the deposit does not need to be repaid. They can continue to live in their home, without a payment, AND set their estate up in a way that will support their heirs to the level they desire.

Benefits:

  1. The client unlocks the equity from their home and creates a more comfortable monthly cash flow situation
  2. The client is able to accomplish their goal without restructuring their lifestyle

Considerations:

  1. Client(s) must be over the age of 62
  2. The property must be the clients primary residence

Situation 3:

  1. You have a client that is struggling with their monthly budget
  2. Your client is over the age of 62 and still owes 25% of the value of their home
  3. They have expressed a desire to create a legacy for their heirs but are unsure where the monthly funds would come from

Solution:

Your client is eligible for a reverse mortgage. Because of their age, they are able to capture about 60% of the value of their home in a lump sum. The first 25% will go to paying off their existing mortgage (freeing up their monthly payment) and the rest of the lump sum can be used in a life insurance policy. With the reverse mortgage, there will also be some cash flow savings as their mortgage payment would be satisfied. Your client could contribute a portion of that to their premium and help grow their policy.

Benefits:

  1. Your client is able to raise their monthly cash flow
  2. Your client is able to use their excess equity to start a Life insurance policy and part of their cash flow savings as a premium payment
  3. You are able to help your client meet both needs, while simultaneously increasing their monthly cash flow
  4. Client has no mortgage payment ever again

Considerations:

  1. Client(s) must be over the age of 62
  2. The property must be the clients primary residence