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Your Money: In Your Walls or In Your Pocket?

 
Despite the fact we’ve seen the likes of Magnum P.I. and The Fonz as spokesmen for Reverse Mortgages, there’s still a degree of mistrust out there that needs to be addressed.  (Fortunately, when Tom Selleck and Henry Winkler are up there telling us about this loan product, they’re not dressed in a Hawaiian shirt or a leather jacket, respectively)  Let me say this from the outset: a Reverse Mortgage is NOT for everyone, but I believe everyone needs to understand what can be ACHIEVED with a Reverse Mortgage before making that final decision.  To that end, I’m going to give you three scenarios of how a Reverse Mortgage can be used to benefit you and your loved ones. 

Scenario 1 – Significant Money Saver
You’ve worked hard and own your home free and clear, but you’re on one side of the country and your grandkids are on the other.  You sell your house and have a very large pile of cash – enough (and a bit to spare) to purchase a home in cash in your new desired location.  Let’s say the price tag is $200K.  Rather than plunk down all $200K (and watch that pile of cash shrink considerably), you can PURCHASE that home with a Reverse Mortgage, and it will cost you only about half that amount – and you’ll NEVER have a monthly mortgage payment.  While you’re NOT paying a mortgage, you’ll have a lot of free time to figure out what you’re going to do with that EXTRA $100K you didn’t have to spend to get that house. 

Scenario 2 – Second Home Without a Payment
You live in a part of the country where it’s absolutely beautiful: rolling hills, greenery as far as the eye can see, lakes and rivers abound – but come November, it gets cold and ugly until about April (or May, if Mother Nature is feeling a bit vengeful).  You want an escape for the winter, a small home in a place where the mercury doesn’t go into hibernation.  You have enough equity in your home that you could do a Reverse Mortgage and pull out enough money to buy that small winter home with cash.  Did I mention that with a Reverse Mortgage on your current home, you wouldn’t have a single monthly mortgage payment?  Yeah, there’s that.  (Scenario 2B: rather than purchasing a second home for yourself, you could take that cash from the Reverse Mortgage and purchase a home for one of your children.)  

Scenario 3 – A Happy Ending
This happened recently with one of our Loan Originators here in the office.  A couple called him and said, “We’re moving to Arizona and want to buy a house.”  That’s never a bad call to receive.  As he proceeded to ask them some questions to help them with a loan, he found that they had sold their business, and they were on their way to Arizona to live closer to family.  For those of you who are a step ahead of me can see a problem: since they sold their business, they had no source of income.  They had financial resources sufficient to cover their living expenses, but they were nowhere near sufficient for an underwriter to approve a standard loan.  Fortunately, the sale of their business garnered a little more than $80K, so our LO talked to them about purchasing a home through a Reverse Mortgage.  With that $80K, he was able to get them into a house for about $160K.  They were ecstatic!  Remember: no monthly mortgage payment!

For anyone who is 62 years of age or older, these scenarios are viable options.  Whether you use a Reverse Mortgage for a Purchase of for Refinancing, the house is yours for as long as you wish to live there.  Another commonly held fear that a Reverse Mortgage will make your heirs liable to pay it back just simply isn’t true.  As I said in the beginning, a Reverse Mortgage isn’t the right fit for everybody, but it’s certainly something everyone should know about whether you prefer a Hawaiian shirt or a leather jacket. 


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