{Case Study} How Eliminating a Mortgage Gave These Grandparents Retirement Security and the Lifestyle They Desired

Client Scenario 

Mike and Jenny (age 74/69) own a home worth $615,000 with a mortgage balance of $239,000 with 26 years remaining on the balance and a monthly payment of $1,310.

Assets: $347,000 in IRA’s, mutual funds and savings.

Social Security: $2780/month

Pension: $1410/month

Distributions: Taking RMD’s of $7300/year

Goals | Concerns 


Concerned about inflation and health care costs.



Would like to share travel experiences with their kids and grandkids and pay for the vacations for the entire family.


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1. Mike and Jenny could continue paying the mortgage and take an additional $12,000 – $15,000 per year out of their investments to pay for the travel expenses.

2. They could use the HECM reverse mortgage to pay off their current mortgage balance–improving cash flow of $1,310 per month without any need to take additional withdrawals from their investments.

  • In this case, the HECM makes $308,880 available to Mike and Jenny.
  • The HECM must be a first mortgage, so their current mortgage must be paid off from the proceeds of the program ($239,000).
  • This leaves them with a $69,880 HECM line of credit with a built in growth factor.

Show and Tell

We created the Housing Wealth Illustrator to allow advisors to receive a ballpark estimate of the line of credit and its ability to be converted into monthly term (or time-specific) dollar amounts. It’s a powerful tool.  If you’re a financial advisor, we invite you to take it for a test drive (even if it’s just for a hypothetical client). Go ahead, click here:


  • No more mandatory mortgage payments.
  • $1,310 in freed cash flow each month that would have gone towards their mortgage.
  • Portfolio and savings preservation
  • A growing line of credit that can be accessed as an inflation buffer, used or for health care expense or to pay for family vacations.

Additional Possible Benefits

Excerpt from The Retiree’s Guide to Housing Wealth (pages 54 -56).

  • Retirement Savings Can Last Longer
  • More Money Each Month
  • Grandchildren’s Education
  • The Gift of Life Insurance
  • Defer Social Security or Investment Portfolio Withdrawals
  • Replace Cost of Long-Term Care
  • Replace Cost of Life Insurance Legacy
  • Protection for Policy Lapses


Clients were able to free up cash flow from refinancing their traditional mortgage into a reverse mortgage. Total positive effect on cash flow over the next 26 years is $408,720.

[Read More] Is a Reverse Mortgage Right for Your Client? Here Are Ten Questions to Get Started

Based on 1 year Libor plus 1.88% margin adjusted annually. Initial Rate 4.927%, Expected Rate 5.065, APR (Annual Percentage Rate) 6.112% as of October 26th 2018. Rates subject to change. Borrower must maintain home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

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