Reverse Mortgages Aren’t Getting the Respect They Deserve

In a funny analogy, CBS calls Reverse Mortgages the “Rodney Dangerfield” of the Financial Planning World – implying that they are worthy of more respect than they are getting. With 60% of middle class Americans holding more than half of their wealth in their home equity, few retirees actually take steps to access it. Those that choose to access home equity, usually do through downsizing, in response to a negative situation like high medical bills. The article points out that another way to access these funds without selling the family home is through a reverse mortgage.

The article addresses several MISCONCEPTIONS that have kept many Americans from taking advantage of this flexible planning tool…

  1. High Costs – Just like conventional mortgage, reverse mortgages have closing costs and can be reduced by comparing lenders. What the article neglects to point out is that the alternative of downsizing, with closing costs from both selling your current home and purchasing a smaller one, would be significantly greater than closing costs for one reverse mortgage.
  2. Family Inheritance – A carefully designed strategy using a reverse mortgage now has the potential to increase the total legacy left to adult children.
  3. Home Title – It is simply not true that the lender owns the title of a home with a reverse mortgage. Just like a regular mortgage, the homeowner keeps title and is not required to pay off any debt until they move or die.
  4. Losing Home to Property, Insurance or Maintenance. The Department of HUD now requires counseling and has enacted rules to discourage taking too much debt too soon. (Even without any mortgage, a homeowner can lose their property from failure to pay property taxes, insurance and maintenance).
  5. Non-Borrowing Spouses. New protections put in place in 2015 allow the non-borrowing spouse to remain on the title and stay in the home even after the borrowing spouse has passed away.

FACTS:

  • You never give up title to your home.
  • You never owe more than it is worth.
  • You never have to leave (as long as you maintain the property, its taxes and insurance.
  • You are never forced to make any loan repayments while living in the home unless you choose to do so.

Viable Uses for a Reverse Mortgage according to the CBS Article include:

  • Generate a Lifetime Income to supplement social security and other retirement resources (similar to an annuity).
  • Provide payments for a fixed period to delay Social Security in order to optimize the benefit.
  • Payoff an existing mortgage to reduce monthly expenses
  • Pay for remodeling
  • Create a liquid asset that can be accessed in case of emergencies, that can also grow and be available later in life to cover medical and long term care expenses.
  • Pay premiums on long term care insurance.
  • Use as an alternate source of income when stock market and other investments are down to avoid unwanted losses.
  • Pay for living expenses if other resources become depleted.

If you would like to explore the possibilities of a Reverse Mortgage in your financial plan, schedule a free consultation with one of Landmark’s Reverse Mortgage Planners.

Read the entire CBS Article: www.cbsnews.com/news/reverse-mortgages-rodney-dangerfield-of-retirement-planning/