By Alain Valles, CRMP, MBA, CSA
Reverse mortgages are government-insured loans also known as Home Equity Conversion Mortgages (HECMs). These loans allow qualified senior homeowners to convert illiquid home equity into available tax-free cash for immediate or future use with the option of making no monthly payments as long as real estate taxes and property insurance are paid and other guidelines met.
Current challenges: The facts from various studies over several years continue to show that a significant percentage of seniors are very concerned with how they will be financially able to retire in place and have a high quality of life. The top concerns include: increasing costs of daily living; healthcare expenses for current ailments and the worry of future medical events; home repairs; insufficient retirement savings; no pension plan; low Social Security income, no longer able to work, loss of a spouse’s income resulting from death or divorce, and supporting children and grandchildren. These cash flow hurdles can damper the goal of remaining independent in one’s home.
Potential solution: According to the U.S. Census Bureau, the 2016 homeownership rate for seniors ages 65 and older was 79 percent with approximately two-thirds owning their homes without a mortgage. Millions of older homeowners have the opportunity to live financially independent in their homes by utilizing a reverse mortgage. But even though reverse mortgages have been available since 1987, only a small percentage of eligible seniors have utilized a reverse mortgage to augment their financial retirement strategy. The primary reason is lack of trust.
Why the lack of trust: The recent Urban Institute report found that the top concern about reverse mortgages is “getting scammed”. Other worries include losing one’s home, and the cost. Kent Healy of “The Uncommon Life” states “…our greatest problems are twofold: one, a lack of information and two, perhaps most importantly, a plethora of wrong information.” My take is the lack of trust in reverse mortgages is lack of education (uninformed) and pervasive untrue myths about reverse mortgages (misinformed).
Get the facts: The Merriam-Webster dictionary defines trust as “assured reliance on the character, ability, strength, or truth of someone or something.” You’ve heard the words “reverse mortgage” but have you invested time to better understand the mechanics and debunk the myths?
The key is getting the facts from an independent third party and then talk with an experienced professional. An excellent start is to read the only federally approved consumer booklet published by the National Council on Aging, “Use Your Home to Stay at Home.” You are welcome to call or email me and I’ll forward a free copy to you.
Also, HUD-approved nonprofit reverse mortgage counselors are available to give you a non-vested education about the merits of a reverse mortgage. I’ll be happy to give you a list. And lastly, with no obligation, I’ll also be happy to give you various scenarios for your particular situation. That will allow you to compare different options to help you achieve your long-term goals.
Being better informed will allow you to trust deciding if a reverse mortgage is the best solution for you.
Alain Valles, CRMP and president of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional in New England and is the leading licensed loan officer in Massachusetts. 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.