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What the Press Gets Wrong About Reverse Mortgages

Sadly, the understanding of how a reverse mortgages works remains weak. The fact is the HECM Reverse Mortgage always has provided essential safeguards for the consumer since its inception by Congress in 1989. So even if it is wise to avoid using the word “never” in life, homeowner fears are allayed via an understanding of the HECM 4 Nevers.

HECM Never #1

The HECM is a mortgage like any other but with deferred payment. When the homeowner leaves the house, there is a mortgage attached to the home that must be paid. The homeowner’s heirs can elect to pay off the HECM (but never have to pay more than 95% of the home value) by acquiring their own financing, thereby keeping the house in the family.

Alternatively, they can elect to sell the house with any remaining profit being theirs to keep. The HECM, unlike some older reverse mortgages, does not allow the lender to take an equity share on appreciated value. All available equity beyond the loan balance belongs to the borrower or the estate. Additionally, if the loan is underwater, they may grant the lender a deed-in-lieu, hand over the keys, and literally walk away. The lender’s loss is made good by the FHA insurance pool, with no recourse to the borrower or the estate.

*Remember, foreclosure can happen when taxes, insurance, and reasonable home maintenance are not provided by the homeowner. Taxes, insurance, and home maintenance (including HOA fees) are the only mandatory funding obligations for the borrower.

HECM Never #2

The HECM protects the borrower and all heirs. The loan documents state that “no deficiency judgment may be taken against the borrower or his estate.” It is not possible for the parents to leave a reverse mortgage debt to their children to have to pay.

This safeguard is possible because the HECM is a non- recourse loan. When a person applies for the HECM, the borrower is not required to verify that the loan can be repaid. The house alone serves as collateral for the loan. If the estate sells the house to satisfy the HECM loan balance, any remaining equity belongs to the heirs. The lender cannot access any equity beyond the loan balance. The heirs may retire the mortgage for 95% of the home’s appraised value, or the loan amount, whichever is less.

HECM Never #3

Some people think that people with reverse mortgages have given their homes to the bank, and once the bank decides it has lent enough money, it can throw the homeowners to the curb and force them to move. We have already seen that the HECM protects ownership and that the borrower never gives up the title, just like any mortgage. Yet unlike other mortgages, the HECM does not have a “maturity” or required end date.

Well, technically there is an end date, but one that should not give much worry. The HECM comes due on the 150th birthday of the youngest borrower! The loan does require meeting obligations of home ownership, just as any mortgage does. The homeowner must maintain his or her property taxes, just like any mortgage. The homeowner must maintain property insurance to protect against fire and other hazards, just like any mortgage. Additionally, the borrower must not allow the home to fall to ruin, just like any mortgage.

So let’s bring up that ugly word: Foreclosure. In the go-go years of easy credit and rapidly increasing home appreciation, some borrowers used a reverse mortgage like an ATM. They stripped their home equity and could not, or would not, pay their tax and insurance obligations. Under the terms of the loan, lenders were faced with foreclosing in these cases.

Foreclosing on seniors is tragic under any circumstances and reporters had a heyday with it. The fact is these technical foreclosures had nothing to do with the loan being a reverse mortgage. Tax and insurance default can result in foreclosure for mortgages, period. There is nothing special about a reverse mortgage in this regard.

HECM Never #4

However, there is something special about reverse mortgages and foreclosure beyond taxes and insurance. The risk of foreclosure with a HECM is fundamentally and drastically different. This is because monthly payments are never required. Therefore, no foreclosure based on non-payment can ever happen.

So think about this: is Homeowner #1, who carries a traditional mortgage requiring monthly debt service, better off than Homeowner #2, who cannot lose the home by missing payments? At minimum you must admit that there is greater risk of foreclosure for anyone holding a standard amortizing loan (with payments) versus a reverse mortgage (with no payments required). As long as taxes, insurance, and maintenance obligations are met, the HECM persists until the last borrower, or eligible non-borrowing spouse, dies, moves, or sells.

The HECM loan documents state this feature in unambiguous terms: 

No deficiency judgments. Borrower shall have no personal liability for payment of the debt secured by this Security Instrument. Lender may enforce the debt only through sale of the Property. Lender shall not be permitted to obtain a deficiency judgment against Borrower if the Security Instrument is foreclosed. If this Security Instrument is assigned to the Secretary upon demand by the Secretary, Borrower shall not be liable for any difference between the mortgage insurance benefits paid to Lender and the outstanding indebtedness, including accrued interest, owed by Borrower at the time of the assignment.

In other words, the lender can assign the loan to FHA (“the Secretary” of HUD) to recoup losses and the borrower has no personal responsibility for the loan. Regardless of what the loan balance becomes, as long as home ownership obligations are met, the HECM is totally open-ended. The home is there to serve the borrower for as long as he or she lives in the house, all thanks to FHA insurance.

Don’t Wait to Consider a Reverse Mortgage

People familiar with reverse mortgages know that the initial benefit is affected by home value, homeowner age and interest rates. The higher the age, the more money available, the higher the interest rate, the lower the available credit at outset. This can encourage folks to attempt to “time” setting up a reverse mortgage. Yet there are several considerations that make this approach problematic. 

Most importantly, today’s housing values are at an all-time high. “Since 1968, average single-family home prices have consistently risen, reaching the all-time high of $432,700 in June 2025.” United States Existing Home Sales Prices

Secondly, if homeowners delay setting up a Home Equity Conversion Mortgage reverse mortgage line of credit, they will miss out on the compounding growth that could serve them well later in retirement.

 Nobody can predict the future of home prices or interest rates but setting up a reverse mortgage line of credit now ensures that the homeowner’s access to home equity credit will grow at a rate aligned with prevailing interest rates. And most strikingly, this reverse mortgage line of credit cannot be frozen, cancelled, or reduced by the lender. The growth in credit is there month after month and immediately accessible to the homeowner when he needs it.

This growth feature is significant, as well, should there be a drop in housing values. The reverse mortgage line of credit, once established, is completely independent of future declines in home assessments. It is important to understand that the house is the sole collateral for the loan and regardless of what happens to home values, the house will provide pay back, not the owner or his heirs.

Another consideration is making sure that the homeowner is not so financially compromised that he cannot honor his tax and homeowner’s insurance obligations. Although qualifying for a reverse mortgage is less stringent than a traditional loan in which the homeowner must be able to demonstrate the ability to make monthly mortgage payments, lenders must be convinced that taking on a reverse mortgage is a sustainable option for the homeowner. In other words, even though there are no monthly principal and interest payments ever due, a reverse mortgage will not be a solution for someone who cannot afford the other obligations of home ownership.

Summary

Benefits of Early Setup:

Early setup allows for compounding growth in the HECM line of credit (LOC), which can serve as a financial safety net. ​

Establishing a HECM early provides an alternative source of income during market downturns, reducing the risk of portfolio depletion. ​

Flexibility of HECM:

The HECM offers unique flexibility, allowing homeowners to treat it as an interest-only loan, make voluntary payments to keep the loan balance low, or let interest accrue if needed. ​

Borrowers can adjust their strategy based on their financial situation, ensuring peace of mind and financial security. ​

Non-Recourse Guarantee:

The HECM ensures that the house, not the borrower or their estate, repays the loan balance, even if the loan exceeds the home’s value. ​ This shifts the risk to the FHA insurance pool. ​

#305: Using a reverse mortgage to help fund adult child’s second honeymoon

MAKING CHILD’S SECOND TIME A CHARM

“A wedding planned in your fifties is a different planning problem from the one the bridal magazines were written for,” Eleanor Wren explains in the If She blog, cautioning couples to “scale down before scaling up” in terms of spending. “Money is better spent buying back time than buying up a step,” Wren advises. “For brides scaling down from a young bride’s default, the savings often equal one significant piece of post-wedding spending: a first-class honeymoon flight, a small home renovation,” she adds.

It’s interesting that these last two items are precisely the ones with which you are contemplating helping your own daughter as she embarks on a second marriage (she was widowed fifteen years ago, and, after struggling to raise three children on her own, has finally found love again. In the process of moving from her apartment into her fiancé’s home, your daughter’s confided in you that she would have liked to make several design changes to the place. Given the costs of the wedding, any big expenditures would need to be postponed, they’d realized. They are in the process of planning a brief honeymoon trip, but, with an eye to the finances, have ruled out flying to Europe and will probably just enjoy a week in French Lick.

As a widow yourself, retired these last ten years, you’ve needed to be very careful to preserve assets and avoid irresponsible spending, but with this occasion representing so much hope and promise, you’re determined to make these two meaningful gifts. In order to avoid increasing the amount of the periodic withdrawals from your retirement accounts, you’re contemplating applying for a home equity loan of between $20,000 and $30,000. Obviously, there will be regular payments to make, but you think that might be the easiest way to finance the gifts, actually giving a lump sum to the couple for the honeymoon trip, then paying for the home improvement project as the work progresses. 

You might find that using the equity built up in your own home in the form of a reverse mortgage, a more budget-friendly way to raise the capital needed to fund the home adaptation, plus treat your daughter and new son-in-law to some honeymoon “extras’. Just as would have been true with a home equity loan, you will remain responsible for property taxes, homeowner’s insurance, association fees, and overall maintenance costs on your own home. The big difference is that with a reverse mortgage, there will be no obligation to make monthly mortgage payments.* In fact as you make withdrawals from that line of credit (either to pay the contractors for the improvements on the couple’s home or, right away, fund the honeymoon trip, those withdrawals will be tax-free.** In fact, the “un-borrowed” portion of your equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance.

As proud mother-of-the-bride, you’ll be turning those two “significant pieces of post-wedding spending” into one very meaningful gift.

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

**Please consult a tax advisor.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

#304: Using a reverse mortgage to build an ADU

 HOME EQUITY HELPS CREATE LIVING SPACE FOR TWO — GENERATIONS

For years now, even before aging in place was a “thing,” you and your significant other have pictured spending the rest of your lives in the Indy neighborhood where you’ve lived since the early years of your marriage. With your retirement planned for next year (his coming up at the end of this one), you’ve already begun the very minor upgrades needed for your ranch-style home, which you’ve always kept in excellent repair.

Your one daughter, who is divorced, has worked for decades as a traveling nurse. She is now set to move back to Indiana next spring, having accepted a position (thankfully, a non-traveling one!) at a hospital here. In preparation for her arrival, you’d begun driving around, scouting out homes within convenient distance (convenient to her new office and selfishly of your own place!).

A few weeks ago, invited to a book club meeting on the northwest side of town, you were shown a possibility you hadn’t considered. Your hosts’ home had what they called a “carriage house” on their grounds, a very charming, fully furnished small home that the hosts were renting out as an Airbnb. That visit planted a seed in your minds: Why not have one of those small homes built on your own property for your daughter to live in? (Much to your delight, she liked the idea, although she didn’t want her parents going out on a limb financially.) You’ve already begun investigating the laws for Marion County and – it’s permitted! Now, after meeting with several builders and gotten cost estimates, you’re contemplating a second mortgage on your own home in order to avoid the tax effects of cashing in a substantial chunk of your investments, or the need to claim social security benefits earlier than you’d planned.

You might find a reverse mortgage a more budget-friendly and tax-friendly way to raise the capital needed to create the ADU (Accessory Dwelling Unit) for your daughter. As would be true if you took out a second mortgage, you’d remain responsible for property taxes. homeowner’s insurance, association fees, and overall maintenance costs on your own home. However, with a reverse mortgage, so long as at least one of you continues to occupy your home, there will be no monthly mortgage payments. As you make withdrawals from your line of credit to pay the contractors, those will be tax-free.* In fact, the un-borrowed portion of your housing equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance.

There will undoubtedly be many details to work out with your daughter as well as your estate planning lawyer and tax adviser, but the beauty of the plan is that you’d be using your housing wealth to create housing for your daughter convenient to her place of work and close to you! 

*Please consult a tax advisor.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

#303: Using a reverse mortgage to restore income stability post-divorce

POST-DIVORCE, HOME EQUITY HELPS RESTORE EQUILIBRIUM 

In the two years since you retired, life has seemed to be on a negative turn. After 35 years of marriage (three grown children and a couple of grandkids) – last year, your husband moved out and initiated divorce proceedings.

In the divorce, (which was mediated), there was never any doubt about who would be allowed to stay in the home (you had inherited the house from your parents and it had remained titled in your name). However, you were ordered to transfer a chunk of your own retirement savings to him (to make up for the fact that he’d contributed to maintain the place and make improvements). One positive factor in all this is that, prior to your husband’s decision to end the marriage, a number of upgrades were done on the property to make it suitable (for the two of you, you’d believed at the time!) to “age in place”. 

Taking stock of your own finances going forward, you’re reassured that despite the forced transfer of funds to your now” ex,” most of the nest egg accumulated over the course of your own professional career is intact; you have good medical and long term care insurance in place, Still, you’re now realizing how challenging it might prove to be to support your own needs and keep up with property taxes, homeowner’s insurance association fees, and overall maintenance all on your own.

The data may be of only small comfort, but “gray divorce”, which is divorce occurring among adults age 50 and older (what you’ve just experienced), is a growing phenomenon; which, according to a report in the National Library of Medicine, can cause as much as a 45% drop in women’s standard of living post-divorce.

The silver lining in your own divorce story is to be found in your housing wealth. While you’ve needed to transfer a portion of your retirement savings to your ex, the equity in your home can be accessed through a reverse mortgage line of credit. And while it’s true you will remain solely responsible for property taxes, homeowner’s insurance, association fees and overall maintenance costs, your withdrawals will be tax-free.* The unborrowed portion of your housing equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance, and so long as you continue to occupy the home, there will be no monthly mortgage payments.** What’s more, neither you nor your estate will ever owe more than the home’s value (a reverse mortgage is a non-recourse loan).

As you embark on your post- gray divorce future, your home equity can help restore some measure of equilibrium to your life.

*Please consult a tax advisor.

**Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

#302: Using a reverse mortgage to avoid “boldness regrets”

BOLDLY VENTURING OUT WHILE STAYING SAFELY AT HOME 

Overall, looking back over the five years since you retired, the two of you are generally satisfied that your careful planning has “paid off”. You’ve been able to check all the important items “off your list” – the home remodel and system upgrade, the life/long term care insurance policy, the prepaid funeral arrangements, the auto maintenance warranties, plus visits to (and gifts to) kids and grandkids, not to mention updated estate planning documents. Every one of these things, you’re proud to say, was accomplished with zero debt incurred. Life has settled into a very pleasant routine. Active members of your local community center, you’ve enjoyed cultural events and exercise classes there along with a circle of close friends.

Then, after participating in a book club discussion of the Daniel H. Pink book, The Power of Regret: How Looking Backward Moves Us Forward, 

you couldn’t help but realize that you really do have regrets. Has being so orderly and well-planned meant there’s never going to be “more” and “bolder”? Once that “seed” was planted in your minds, you agreed to each come up with ideas for – and research – the costs and steps needed to implement a “bold venture” in the form of travel, which you agreed would include as many family members as possible. So far, you’ve both been gravitating towards the concept of a trip to Europe or Africa. However, while you agreed that working on the details feels “freeing”, as lifelong planners and careful money managers, you’re not sure you can muster sufficient financial “boldness” to move ahead.

The path to financing your “more and bolder” venture with the least disruption to your carefully budgeted retirement finances might be through your housing wealth in the form of a reverse mortgage line of credit. Once the details of the trip itself have been agreed upon, you can use tax-free* withdrawals to pay for the expenses. There will be no required monthly or quarterly mortgage payment**, and the “unborrowed” portion of your housing wealth will be guaranteed to grow at the same rate as the interest being charged on borrowed funds.

You’d be boldly venturing out – while staying safely at home – continuing your “very pleasant routine”!

*Please consult a tax advisor.

**Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

#301: Using a reverse mortgage to fund travel 

STAYING HOME WHILE TRAVELING THE FAR EAST 

Prior to your retirement last year, you had spent your entire adult lives working full-time as educators, spending every summer hiking and touring in Europe, Canada, or South America. Your plan was to keep living in your home, using your travel budget to explore destinations in Asia.

You’d assumed that your home, a ranch-style house built on a relatively small parcel of land and long ago fully-paid for, would be suitable for “aging in place” without the need for major renovations, and, to a large extent, that’s still true. However, due to a back injury your husband sustained in an auto accident, he now uses a wheelchair or walker most of the time. There was a settlement, which was enough to fund the building of a ramp and a bathroom overhaul. But, obviously, the travel lifestyle you’d envisioned is going to be dramatically reshaped.

You’d been told about the non-profit Road Scholar organization, “a community of people who love learning and exploring the world,” and are encouraged by the fact that they offer tours – including to east and southeast Asia – tailored to mobility needs. However, the cost of these trips is substantially higher than you had originally bargained for. Instead of the two trips per year you’d envisioned for the first five years of retirement, you may need to cut back to one a year or even one every other year.

“It’s not that simple for people with disabilities whose accessibility requirements often lead to additional costs,” wheelchairtravel.org admits, reflecting on h ow destinations, business, and disabled people themselves can work to reduce “disability surcharge.”

Still, rather than cutting back on the travel adventures you’d planned for the early years of your retirement, you might consider tapping the equity built up in your home by applying for a reverse mortgage.

Needless to say, you’d continue to pay real estate taxes and insurance and keep the home in good repair, but there will be no monthly mortgage payment* to worry about. In fact, as you draw funds from your line of credit to pay for the trips, any unused portion of your equity will be credited with (non-taxable) growth at the same rate as that being charged on borrowed funds.

True, that auto accident changed your lives, and not for the better, and hiking Asia has been taken off your life planning list. Turns out, though, your decision to “stay home” could be the key to your being able to realize your dreams of exploring the Far East.

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

Rethinking the Buckets: Where Does a Reverse Mortgage Fit?

For years, financial planners have used a “bucket” approach to help retirees organize their assets — segmenting resources into short-term and long-term buckets to balance spending needs against investment risk.

A related but distinct version of this framework organizes buckets around lifestyle instead of time horizon: Protect, Enjoy, and Preserve. While there are different variations, most divide retirement resources into three categories:

  • Protect – Essential expenses like housing, food, utilities, taxes, and healthcare.
  • Enjoy – Lifestyle expenses such as travel, dining out, hobbies, and entertainment.
  • Preserve – Charitable giving, gifts to family, and other aspirational objectives.

It’s a simple framework that helps retirees align their resources with their priorities. But where does a reverse mortgage fit?

The answer depends on which reverse mortgage strategy is being used.

Option 1: Use a Tenure Payment to Fund the “Protect” Bucket

A reverse mortgage, such as a HECM tenure payment, provides steady monthly cash payments* for as long as at least one borrower lives in the home as a primary residence and continues to meet the loan obligations. In many ways, it behaves like another source of retirement income — supplementing Social Security, pensions, bonds, or annuities rather than replacing them.

Consider a retiree whose essential monthly expenses total $6,000:

  • Social Security provides $3,500.
  • A bond ladder or annuity provides $1,000.
  • A HECM tenure payment provides $1,500.

Together, that’s enough dependable cash flow to meet essential expenses without increasing withdrawals from investment accounts. This strategy can reduce pressure on the portfolio and help preserve assets intended for future spending or growth.

Option 2: Use a Line of Credit to Fund the “Enjoy” and “Preserve” Buckets

A different approach leaves essential expenses funded by traditional income sources and establishes a HECM line of credit as a reserve instead.

Rather than withdrawing from investments during a market decline to pay for discretionary expenses — vacations, home improvements, helping grandchildren, replacing a vehicle — the retiree can draw on the line of credit. When markets recover, portfolio withdrawals can resume, giving investments more time to rebound.

Researchers such as Wade Pfau, Harold Evensky, and Barry Sacks have described this as a buffer asset that helps manage sequence-of-returns risk. The goal isn’t simply to borrow money — it’s to increase flexibility during the periods when selling investments would be least desirable.

Two Strategies—One Goal

Although these approaches differ, they share the same objective: protecting the retiree’s lifestyle.

A tenure payment strengthens the Protect bucket by creating another dependable source of income. A line of credit strengthens the Enjoy and Preserve buckets by providing a flexible source of funds that can reduce pressure on investments during unfavorable markets.

Neither strategy is universally better — the right choice depends on a retiree’s income sources, assets, spending goals, and overall retirement plan.

Perhaps the most important shift is recognizing that home equity isn’t just a static line on a balance sheet. Used strategically, it can become an integral part of a retirement income plan — either securing essential income or providing flexibility to preserve a retiree’s long-term lifestyle.

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Connecticut Mortgage Lender License ML-1025894. Florida Mortgage Lender Servicer License MLD1827. Maine Supervised Lender License 1025894. Massachusetts Mortgage Broker and Lender License MC1025894. Licensed by the New Hampshire Banking Department, Mortgage Banker License 1025894MB. Licensed by the New Jersey Banking and Insurance Department.  New Jersey Residential Mortgage Lender License 1025894. Pennsylvania Mortgage Lender License 72932. Rhode Island Lender License 20163229LL. Rhode Island Loan Broker License 20163230LB. Virginia Mortgage Broker and Lender License, NMLS ID #1025894 (www.nmlsconsumeraccess.org). Subject to credit approval. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. For licensing information, go to:www.nmlsconsumeraccess.org #4533900893

Equal Housing Lender

#300: Using a reverse mortgage to keep your home in the family 

MODIFY THE HOUSE, TWEAK THE ESTATE PLAN 

As a lifelong do-it-yourself-er, your husband has been making plans to change several things about the home in which you’ve spent the past forty years (now that the two of you have agreed to spend your hopefully long “old age” right there. As a lifelong careful manager of the household money matters, you’re trying to work out the budgeting for the proposed changes. It’s apparent that some borrowing will be necessary, particularly since the bulk of your financial resources are in tax-deferred accounts and a couple of business rental properties that produce very little net income. You’ve been researching both second mortgage loans and reading up on reverse mortgages. 

Some four years ago, as you were going over all your finances, preparing for your retirement (which happened last year), you had meetings with an estate planning lawyer and made some important decisions (creating a trust and the other documents). To ensure (hopefully) there would be no bad feelings or resentments among the sons later on, you “hosted” a special family get-together to explain your intentions. Everyone was comfortable with the idea that the only one of the three sons who lives anywhere near you (and who does not have a family or own a home) would inherit the house. 

Now, as you consider a reverse mortgage to fund the “big reno,” you’re worried that you’ll need to redo the whole estate plan (so much time – and money – went into that effort…) in order to make the property division “fairer” to this one son (who would be saddled with a big loan). 

Establishing a reverse mortgage line of credit to fund the aging-in-place renovations need not mean a total reworking of your estate plan. True, were you to move out of your home (or at the time when the second of you has died), dies, the reverse mortgage loan balance would need to be paid off in order for your son to keep ownership. An idea to consider would be using part of the reverse mortgage line of credit to fund a “second-to-die” life insurance policy with your third son named as beneficiary. That could provide money for him to pay off the reverse mortgage balance.

As a “lifelong careful manager of the household money matters,” you’ll agree that having a conversation with a reverse mortgage professional, an insurance agent, and your estate planning attorney” will be the right next step. That way, your husband can focus on modifying the house; the two of you can work with your lawyer to “tweak” the estate planning documents.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702.

These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender