(970) 426-LOAN
(5626)
Here’s a compelling reason to take a reverse mortgage ahead of retirement
The loan can help eliminate a massive burden for senior homeowners
February 15, 2019, 2:48 pm By Jessica Guerin
​
It’s a safe bet that any reverse mortgage loan officer will stress to you that the loan is not for everyone – and just like any financial product, that’s true.
​
But for older homeowners with sizable equity and no intention of relocating in retirement, the loan can make perfect sense. So much sense, in fact, that financial advisors are increasingly embracing the loan’s use as part of a greater financial strategy in retirement.
​
And here’s one compelling reason why:
My thoughts on the article: After reading this, I feel that Jessica hits on a few very key points of reverse mortgages. 1) The ability for retirees to have control over their cashflow. 2) The benefit of the growing line of credit feature. 3) The optional payment to pay down the mortgage.
​
Jessica hits on a way to utilize the reverse mortgage in a way that most borrowers have not considered. Yes, when you use the reverse mortgage to payoff an existing forward mortgage, you will eliminate your mandatory monthly mortgage payments, which wil undoubtably be able to increase your cashflow. However, Jessica takes this idea one step further and talks about still making payments towards your reverse mortgage, when times allow for it. By doing this, you would eliminate one of the big fears of having a reverse mortgage, which is that you will not have equity left for your heirs. If you are still making payments towards the interest and/or principal at your convince, then you are effectively not giving up any equity in the property, and in fact still gaining equity in the property (not to mention the growth in equity simply from the value of the house increasing). Also, making payments towards the mortgage will indeed increase the value of a growing line of credit, which will allow more access to money down the road, should the retiree need to access it for medical reasons. As she states, ultimately the reverse mortgage will give clients much better control over their cashflow, which is a huge burden to be lifted.
​
In divorces, a reverse mortgage could help resolve a big problem
Feb. 16, 2018 at 5:00 a.m. MST By Benny L. Kass
​
This is a fictional scenario based on real-life situations I’ve seen: Sam and Sara have been married for a number of years, and have made the difficult decision to get a divorce. They are both in their 70s and jointly own their house with a value of $600,000.
​
Sara wants to stay in the family home; Sam is agreeable but wants to be able to buy a small condominium. However, there is a $200,000 mortgage on the family home, and the current lender is not willing to release Sam from that obligation unless it is paid off in full. The lender’s position is that Sam and Sara both signed the loan documents, and this cannot be changed.
My thoughts on the article: As unfortunate as the circumstance bay be, the fact is that "silver divorces" are becoming increasingly more common. This article does a good job of laying out a situation in which the reverse mortgage program can help both parties accomplish their financial goals through the separation. I have often heard of couples unhappily staying in marriages together, simply for the fact that they feel they cannot afford to separate. There is no other financial product available that has the potential of allowing both parties a stable living situation after the divorce, as well as maintain their current quality of life.
​
Busting Three Half-Truths About Reverse Mortgages
Jun 24, 2019, 02:33pm By Jamie Hopkins
​
A few years back, I conducted and published research in the Journal of Financial Planning that showed Americans don’t understand reverse mortgages. In fact, respondents scored below 50 percent on a 10-question true-false quiz.
​
One possible explanation for the poor performance is a lot of misinformation floating about. A recent USA Today article titled “Considering reverse mortgages? Better to reverse course on this risky course” confirms my belief. The article contains many half-truths and misunderstandings and projects a negative connotation of reverse mortgages onto the reader.
My thoughts on the article: Mis-information is the biggest challenge when it comes to helping people explore if a reverse mortgage makes sense for their family and lifestyle. You will generally find five negative articles, for every one positive one. Almost all of these negative articles have a few things in common. 1) They are looking a circumstances from previous reverse mortgage programs (generally the early 2000's) when this program was far less regulated. Over the last decade, the HECM program has changed dramatically and borrower protections have been put in pace to protect consumers. 2) The information the article's are based on is not entirely true, or in-fact completely false 3) The authors' have a general distain for debt as a whole, regardless of an individual's circumstances or financial goals.
​
Jamie does a good job providing some examples of a few of the many misunderstandings about reverse mortgage, and how those misunderstandings can result in negative feelings and a dis-trust for the program.
​
Using Reverse Mortgages In A Responsible Retirement Income Plan
Wade Pfau, Ph.D., CFA
​
Though reverse mortgages have long held a bad reputation, research and public policy in recent years are shedding new light on their potential uses in retirement. The vast majority of reverse mortgages in the United States are Home Equity Conversion Mortgage (HECM – commonly pronounced “heck-um”) reverse mortgages, which are regulated and insured through the federal government by the Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA).
​
​
My thoughts on the article: Dr. Wade Pfau is a highly regarded financial planner. He has authored many books ad article speaking to the value of using a reverse mortgage a piece of responsible retirement planning. You will find myself, and many other reverse mortgage lenders referencing his work when talking to clients about the benefits of reverse mortgage in planning for their futures.
​
This particular article is a brief overview of why using a reverse mortgage can be beneficial in planning, getting into the program early, and not just relying on the HECM program for a last resort.
​
What the Critics Get Wrong About Reverse Mortgages
Wade Pfau, Ph.D., CFA
​
In isolation, reverse mortgages can look expensive, and one might question the motivations of those researchers who argue that reverse mortgages can add value. But reverse mortgages should not be viewed in isolation. They are a piece of a larger puzzle that retirees are trying to solve. Reverse mortgage costs can be offset by gains elsewhere in the overall financial plan.
My thoughts on the article: In this article, Dr. Wade Pfau speaks to one key feature of Reverse mortgage in retirement planning; utilizing a reverse mortgage to preserve and grow your net worth in retirement. He runs through a specific example to show how the utilization of a reverse mortgage in conjunction with a retirement portfolio can indeed leave you with a larger next egg to leave your heirs. I touch more on this topic on the "Reverse Mortgage as an Investment Asset" Page.
​
Finance Columnist Describes Reverse Mortgage Change of Heart
January 9, 2020 by Chris Clow
​
As the reverse mortgage industry continues to deal with issues related to its reputation among consumers and other financial professionals, a respected financing columnist has recently discussed how her former opposition to reverse mortgage products has evolved into an appreciation for them due to additional borrower protections and strategic use cases.
​
​
My thoughts on the article: What I love about this article is how it addresses some key differences in how reverse mortgages work today, versus how they worked in the past. One of those being the borrowers ability to keep up with their monthly obligations outside of the reverse mortgage funding.​ The other key point that is brought up is the value of the growing line of credit as an investment and cashflow tool, which is a far underutilized benifit of the reverse mortgage. Click here to visit my "Reverse Mortgage as an Investment Asset" Page.
Researchers Say Reverse Mortgages Deserve A Second Look
March 30, 2018, 10:03am By Jamie Hopkins
​
What’s the deal with reverse mortgages? This question was addressed in a recent Housing Wealth in Retirement Symposium held on March 23, 2018, in Washington, DC. The event was co-hosted by The American College of Financial Services and the Bipartisan Policy Center. While the symposium took a broader look at housing wealth and retirement security, a constant theme was the role of reverse mortgages under the Home Equity Conversion Mortgage (HECM) program sponsored by the federal government. A key takeaway from the researchers and policymaker presentations at the event was that reverse mortgages are underutilized by seniors today and can help provide added retirement funding security to Americans when used appropriately.
My thoughts on the article: This article best explains what I have been trying to educate people on since i have been working with reverse mortgages. Getting a reverse mortgage early on in retirement is more beneficial, and working together with your overall portfolio in retirement provides the highest probability of long-term success. Again, the page I authored "Reverse Mortgage as an Investment Asset" speaks to this in more detail.
​