Reverse Mortgage magazine Nov-Dec 2020

Money Sense by Merrill Maximizing Your Home as an Asset By Merrill Lynch Wealth Management Note to our readers: This consumer-friendly column can be used by loan originators to help educate potential clients about personal financial issues and ideas. OWNING A HOME provides you with much more than a roof over your head. Your home is a versatile asset, a kind of financial Swiss Army knife that can be used to help fund a college education or to pay down an onerous credit card debt, for example, or to provide a steady income stream, or as an investment that adds diversity, growth potential and tangibility to an asset portfolio. “I think it’s important that people [who own a home] consider using it as an asset,” says FPA member Dennis R. Nolte of Seacoast Investment Services in Oviedo, FL. Nolte is a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional. Here are several ways to tap the value of that asset. A Mortgage Refinance Refinancing a mortgage essentially entails moving out of an existing mortgage loan on your home to a new loan, a transaction that typically comes at a cost to the homeowner—two to three percent of the overall amount borrowed is a good rule of thumb, although costs can range higher and lower. Given the potential long-term financial implications, the decision whether to refinance should come only after carefully considering the costs, benefits, risks and tax rami- fications. A financial professional can help you weigh those factors to come to a decision that’s in your best interests. To find a CERTIFIED FINANCIAL PLANNER™ pro- fessional in your area, check out FPA’s searchable national database at PlannerSearch.org. Many refinancing transactions occur because the homeowner wants to access a lower mortgage rate. In most cases, the homeowner (in consultation with a trusted financial professional) deems it worthwhile to take on the cost of the refinance in order to lower his or her monthly mortgage payment or to shorten the term (length) of the loan, such as from 30 to 15 years. So, if prevailing mort- gage rates are lower than the rate you’re currently paying on the loan, it may make sense to refinance, provided the homeowner can recoup the cost of the refinance over time. Lowering the monthly mortgage payment also could free up additional funds for other purposes, such as to invest toward retirement or a college education. Shortening the Money Sense 6 REVERSE MORTGAGE / NOVEMBER-DECEMBER 2020