What the HECM (pronounced heck-em) is a HECM?
12 Ways to Help Improve Your Retirement Results!
A HECM is a Home Equity Conversion Mortgage. As a line of credit, it can’t be cancelled, unlike regular lines of credit which can be closed by the banks. Regardless of your wealth it can be an invaluable tool in retirement income planning and in preserving assets for a spouse or future generations.
In my recent studies on the subject, I learned just how valuable engaging this strategy can be when utilized early and during retirement. Notably, no payments are required so cash flow is not diminished.
Here are 12 ways a HECM can become invaluable to your retirement:
- You can use it to pay off your current mortgage thereby reducing your monthly expenses and increasing your cash flow.
- It can be used to cover essential monthly retirement expenses such as real estate taxes and utility bills which will allow you to hold onto other assets while their value continues to grow.
- If other investment assets you own have depressed values due to market fluctuation you can use a HECM to cover monthly expenses and avoid taking income from assets at the wrong time.
- Use a HECM to cover health insurance for early retirement and before Medicare kicks in at 65 and afterwards to pay for supplemental health insurance and Medicare part B and D.
- A HECM can also provide you with a monthly payments to combine with your other sources of income to help you maintain your lifestyle.
- Use it as a standby cash reserve for emergencies or if you lose your job and need cash flow and don’t want to tap taxable investments.
- If you don’t qualify for Long Term Care insurance you can use a HECM as a backup asset for in-home health care or other long term care needs. If you can’t afford Long Term Care insurance you can use the cash flow from a HECM to purchase a Long Term Care policy.
- Use it to supplement income early in retirement while letting your Social Security benefits grow allowing you to max out your Social Security income benefits at age 70 for a retiree and age 66 for a spouse. Higher Social Security benefits also equal a higher survivor benefit.
- Purchase a home for up to $625,000 and pay half the cost using a HECM with no payments!
- Cover monthly expenses if you are transitioning jobs or while you phase out of work and into retirement by reducing your hours at your current job or a new lower paying, lower stress job.
- Use a HECM to build out a space in your home to bring in an elderly parent to take care of. This can give you time to sell their home while they move in with you. You can get reimbursed later from the sale of their home or from their estate.
- You can use it as a reserve for any family emergencies.
These are just some of the uses of a HECM.
For many individuals their home is one of their most valuable assets and it shouldn’t be considered a ‘dead asset’. The above are great ways to utilize this asset and leverage it to your best advantage!
Not everyone will qualify for a HECM. For example, some condo associations are not approved. There is also an educational requirement before you can consider one for yourself. For those who are 62 or older, I strongly advise going through the educational process of learning more about a HECM.
To learn more about Guy Paredes, view his Paladin Registry research report.
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