What types of people get a reverse mortgage?

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ADV Valles-rsBy Alain Valles, CRMP, President- Direct Finance Corp.

Let’s play a little game. The next time you attend a high school class reunion, visit your local Council on Aging, or gather with a group of friends for dinner, look around and try to guess who  has gotten a reverse mortgage on their home.

Think you’ll be able to tell? You might be surprised to find out the number of people who have taken advantage of the equity in their home to access tax-free cash through a reverse mortgage. And, despite the mass media’s portrayal of a reverse mortgage as a “last resort loan” for desperate seniors, the truth is that people in all economic conditions are using reverse mortgages today.

I have been working with seniors across New England for nearly 20 years, and have arranged reverse mortgages on everything from tiny homes to sprawling mansions. I have personally witnessed hundreds of different reasons for taking out a reverse mortgage.

Yes, there have been instances in which a reverse mortgage was the “salvation” for a senior who was in danger of losing their home due to their inability to pay their monthly mortgage or real estate tax bill. But those situations have been few and far between.

Much more common is a senior couple who wants to fix up their home so that they can live in a home that is more comfortable and safer, but who don’t want the burden of taking on a new monthly mortgage payment. A reverse mortgage provides the cash they need to get the work done, without adding a new bill to pay.

I have seen loving parents and grandparents use a reverse mortgage to gift money to their children and grandchildren to help them purchase a home or help pay college tuition. What a wonderful “living legacy” they are providing for the next generation!

We’ve had a husband and wife take the funds from a reverse mortgage and buy a luxurious recreational vehicle so they could travel the country to visit their children and grandchildren who were scattered across several states. The couple used their home as their “base,” returning after each journey to rest and recuperate before they set off again.

In recent years, an ever growing number of seniors have turned their illiquid home equity into a reverse mortgage line of credit. This gives them access to their cash when they need it.  Unlike conventional bank home equity lines, the unused portion of a reverse mortgage line of credit grows.  Furthermore, bank equity line payments tend to drastically increase after 10 years whereas a reverse mortgage has no monthly payments. Another savvy financial move has been to replace one’s existing bank equity line for a reverse mortgage line of credit.

So when you look around the room at your fellow retirees, don’t assume that only a few have “needed” a reverse mortgage. There are no restrictions on how you can use reverse mortgage proceeds which allows you to better plan and fund the quality of life you desire.

The answer to what types of people are getting reverse mortgages is – all types and for a myriad of reasons.  Your first step is to speak with a reverse mortgage professional and get the facts about your particular situation.  I look forward to your call.

Alain Valles, CRMP and president of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional in New England. He can be reached at 781-724-6221 or by email at [email protected]. Archives of articles from previous issues can be read at www.fiftyplusadvocate.com.