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By: Dan Kadlec - February 4, 2016

Now set-asides are rare, and if you shop around, you m ay be able to

negotiate away the origination fee altogether, says Giordano.

Considering the reverse mortgage

Som e lenders jack up the interest rate to com pensate, warns Michael

Kitces, director of fi nancial-planning research at Pinnacle Advisory

Group. “When I look under the hood, I don’t fi nd costs have com e

down m uch,” he says. Michael Foguth, a planner in Howell, Mich.,

says the loan balance still grows at a com pound rate–interest on in-

terest. “I continue to view it as a loan of last resort,” he says.

If you are near retirem ent age and watch even a little TV, you’ve

alm ost certainly seen Henry Winkler or the late Fred Thom pson pro-

m ote reverse m ortgages. You m ay also have heard watchdog groups

blast both actors for hawking a com plicated product to seniors in

need of cash. What you likely haven’t heard is that the reverse m ort-

gage has gotten a substantial m akeover since the fi nancial crisis.

Still, reform s since the crisis have all but elim inated risky full-draw

loans, curtailing the high-pressure sales tactics that often accom pa-

nied them . Lenders m ust perform a fi nancial assessm ent. There are

also new protections for a spouse whose nam e m ay not be on the

title. In 2014, fi nancial regulator FINRA rem oved offi cial language

calling reverse m ortgages a “last resort” option.

Experts now argue that this type of loan can be safe and even wise–

as well as a key source of incom e that hom eowners short on savings

and planning to stay put should set up the m inute they becom e eli-

gible at age 62. “The strategic use of hom e equity in a retirem ent-in-

com e plan is the next hot topic,” says Wade Pfau, professor of re-

tirem ent incom e at the Am erican College of Financial Services and

retirem ent-research director for an asset-m anagem ent fi rm .

But the big breakthrough has been research showing that hom e-

owners who set up a reverse-m ortgage line of credit early m ay in

tim e gain guaranteed access to funds in excess of the value of their

house. This is a loophole that alm ost certainly will be shut down, Pfau

says. That’s one reason Kyle Winkfi eld, a fi nancial planner in Wash-

ington, D.C., recom m ends that hom eowners with a potential savings

shortfall open a reverse-m ortgage line of credit now. “It’s better to

have this and not need it than to one day need it and not have it

available,” he says.

About 36% of owner-occupied hom es are m ortgage-free, according

to the Census Bureau. The share jum ps to 65% for hom es owned by

folks ages 65 and older. Many other hom eowners have substantial

equity. Yet even am id a retirem ent-incom e crisis, $12 trillion in hom e

equity just sits there for peace of m ind or to preserve a fi nancial lega-

cy. “This is the asset hiding under your nose,” says Shelley Giordano,

chair of Security 1 Lending’s Funding Longevity Task Force, which

raises awareness about how hom e equity fi ts into a retirem ent plan.

Hom eowners who set up a reverse-m ortgage line of credit and do

not use it until they run out of other funds have generally stronger

results than those who do nothing until other retirem ent funds are

dry. Tapping the equity line only when stocks are down, giving your

portfolio a chance to recover, has sim ilar benefi ts. The next tim e a

silver-haired star urges you consider a reverse m ortgage, it m ay be

a sound suggestion.

A reverse m ortgage is a loan that allows you to turn your hom e equity

into cash. The vast m ajority of such loans fall under the federal Hom e

Equity Conversion Mortgage (HECM) program , the only ones m ost

people should consider. With HECM loans, you can take the m oney

as a lum p sum , m onthly paym ent or line of credit. You m ust own

the hom e as your prim ary residence and keep paying insurance and

taxes. When you leave, the house gets sold and you or your heirs

receive any proceeds beyond the loan balance. This has advantages

over a traditional hom e-equity line of credit. You m ake no m onthly

paym ent out of pocket, and the lender m ay not cut or close your

credit line as long as you adhere to loan term s.

This appears in the February 15, 2016 issue of TIME.

Kyle Winkfi eld, m anaging partner at O’Dell, Winkfi eld,

Rosem an & Shipp, has m ore than 15 years of experience

growing clients’ wealth through cutting edge fi nancial strat-

egies. Kyle specifi cally focuses on reducing or elim inating

future incom e tax liabilities and preservation of wealth while

increasing lifestyle security.

In years past, closing costs m ight have included a loan-origination

fee of $6,000, a gaudy “set-aside” of $6,000 and a few thousand

dollars m ore for the m ortgage-insurance prem ium and other costs.

To contact Kyle, please call 877-821-OWRS (6977)

or visit www.owrsfi rm .com .