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Do YOU Own Any Financial Planning Tools?

 The FED raised the discount rate today by yet ANOTHER 200% over the original base now at 4.50%. Add 2 percentage points (200 bps) and you now have 6.5% mortgage rates. Remember the 2.8% rate of a mere 2 yrs ago? You were holding out for 1.9% that never came?
 
Oops! (I didn’t mean to crush your toes). How clumsy of me. 😉
 
Lessons to learn from this:
  • “Pigs get fat; Hogs get slaughtered. It’s ok to be the pig; just don’t be the hog.” Greed creates need.
  • Nothing is “static” until it’s dead.
  • When the Federal Reserve (“da Fed”) tells you they intend on raising the interest rates? BELIEVE THEM.
  • Incrementalism boiled the frog. Pay attention.
  • If you’ve been holding off to purchase a different home? Negotiate your best price now, and BUY IT.

A great strategy is to purchase your new home with a (open - ended) HELOC. You can get a great teaser rate for 2-4 years and then refi later. If you’re over 55, I would use this strategy and calculate the mortgage rate for a common fixed rate loan and pay it on the heloc. DO NOT USE the heloc. It’s simply a way to finance your purchase (nothing else) and nothing more. Take full advantage to make additional payments on the principle to reduce your debt without the large up-front mortgage interest that normally attends conventional 30 yr (closed ended) mortgage programs.

"Buy a blouse, LOSE your house!" Take 9and use) your home equity seriously. If you need to use it at all? Use it to BUY appreciating assets. NOT collectible stuff. Not cars. Not vacations. By making more than the interest payment several times a month, you can kill your debt in less than a decade. No prepayment penalties.
 
By making the estimated payment (vs an interest only payment), you can drop the principal SUBSTANTIALLY during that low interest rate period. When it comes to an end? GET A REVERSE HELOC MORTGAGE (DO NOT use a fixed interest rate reverse as they are useless for retirement planning in any on-going sense of strategic use) for the unpaid balance, and repurpose the same monthly payment to investments and create yet ANOTHER non-qualified investment account that can be used for any good reason with few if any negative side effects.
 
The FHA Reverse HELOC has MULTIPLE advantages over any other type of loan or financial tool:
  • It can never be taken from you (unless you use it to break the law);
  • It is a “FEDERALLY INSURED, FEDERALLY regulated and guaranteed “safe” way to finance or refinance a residential mortgage or purchase.
  • Reverse HELOC mortgage interest is tax deductible regarding the original financed debt; up to $750,000, and only the interest based upon the original mortgage sum. Interest generated from the use of the 2nd year HELOC is not deductible under current tax laws but may be legally used to shelter wealth assets for Medicaid protections that are expanded by the deferred Reverse mortgage interest. These payments of mortgage interest by the HELOC are zero cost tax deductions.
  • The HELOC provides approximately (age adjusted basis) 24-32% MORE EQUITY than the fixed rate FHA reverse, and is a primary reason for avoiding it.
  • Any of the strategies employed in a reverse can be changed. While the interest rate and maximum loan amount cannot be altered, the growth factor of the HELOC feature makes this an incredibly flexible financial planning tool for retirement.

As the mortgage interest accumulates in the reverse, it can be paid down with your new reserve account, and that payment will trigger a 1098 for mortgage interest that can offset much (if not all) of the taxes due from the liquidation. This “payment” will now be immediately available in your Reverse HELOC, and this account is currently growing/adding new available equity without a need of an appraisal or any other expense at approximately 8.5% TAX FREE.
 
This improvement in guaranteed equity growth will continue unfettered until you both die, or leave the home. This will protect your equity for your Heirs and cannot be considered “income”. Think about that in conjunction with most government benefit plans.
 
Alternative strategies would include (but are not limited to) converting some, part, or all of your HELOC balance into Tenure guaranteed income for life that may be suspended, increased, or reduced (by you) at no charge upon demand. You may also convert chunks of your HELOC balance into term payments for your needs. You may also use your HELOC to pay off secured notes, and then redirect the payments to the reverse, and every dime will become immediately available to you in the line of Crédit and add new equity at the prevailing mortgage rate.

If you realise that in a battle of retirement problems and issues that you're virtually unarmed, CALL ME. Do it, now.
 
Daniel J Turner, Principal Advisor
Akamai Wealth Management, LLC
1088 Bishop St. Executive Centre Ste 300
Honolulu, HI 96813
808-691-9200 office
808-464-5292 direct

Advisory services are offered through “Akamai Wealth Management, LLC”. 
(AWM) a registered Investment Advisor registered in the State of Hawaii.

Dan Turner (NOT Akamai Wealth Management, LLC) is mortgage licensed in HI, CA, OR, OH, and IL.
 
 All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current of future performance or indication of future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons.


Investing always involves risk and possible loss of capital.

AWM and Dan Turner ( Principal) are not attorneys or accountants and do not provide comprehensive legal or tax advice. For full disclosure of all relationships associations, affiliations, fees, charges, and capacities please request the ADV 2 A&B from Dan Turner.