Most people are not maximizing their largest asset, their home equity. When I meet retired homeowners I always ask them how they are maximizing their home equity and most people give me a puzzled look.
When someone starts a new job they negotiate the best salary and benefits package that they can. If a person opens a savings, money market, or CD account their goal is to get the best yield possible on their money. When people invest in bonds, mutual funds or the stock market, the hope is to earn interest on their resources.
So, people are trying to earn the most money possible while working and experience the best yield they can to grow their investments. But when it comes to their home equity, 97% of Americans earn 0% return. Why is that? Most traditional mortgages aren’t set up to pay the homeowner interest, that is except for one.
The Home Equity Conversion Mortgage or HECM, is a special loan for senior homeowners age 62 or greater. With this program a senior, with enough equity, can earn 3-5% each year guaranteed! And the interest is compound interest.
Consider this example: At age 62, your home is worth $400,000 and you have $200,000 in equity that you want to earn compound interest annually. After 18 years at age 80 with 4% average compound interest, you would have $405,163.30, essentially doubling your money tax-free from your equity that you would not have earned otherwise. That is the power of compound interest and maximizing your home equity.
Also, when the homeowner decides to access that equity, the proceeds are tax-free, as loans aren’t taxed. Finally, when the loan becomes due (when the last person moves out permanently), the house is responsible for repayment, not the homeowner nor the heirs. Whatever money is left after the sale of the home or refinancing the loan, go to the estate.
Are you ready to start earning interest on some of your home equity? Why not utilize every resource possible in your golden years? It is free to find out if your home equity is eligible to earn a return for you. Contact me to learn more.
