Skip to content

#28 Saying It Isn’t So About Reverse Mortgages


David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

The events of 2020 – in terms of both the pandemic and the economy – have caused you to re-examine several of the income decisions you’d made upon your retirement four years earlier. For one thing, some of your income from part time assignments was negatively impacted, forcing you to take withdrawals from savings and investment accounts you’d thought could remain untapped for at least five more years. And, while stock market growth has worked in your favor, you are feeling less secure going forward. You’ve been exploring possibilities for refinancing your home as a way to feel more secure about your own financial future.

TV ads about reverse mortgages led you to consider that path for yourself. Widowed more than a decade ago, you have no plans to remarry. With a broad circle of friends and favorite cultural activities nearby, there is one aspect of your planning that has not changed – you intend to make every effort to remain in your home. The house itself is well-maintained and even professionally “updated” in terms of décor.

Together with a friend, you attended a couple of online seminars on ways to “utilize housing wealth” in retirement. Initially, the aspect of reverse mortgages you found most appealing, given your own situation, was a ”line of credit” feature delivering a monthly income. While you can already see your supplemental part time income improving this year over last, you would like the security of not needing to tap savings or investments.

The idea of having a regular monthly “supplement” was very appealing to you – that is, until an acquaintance disparaged the idea, comparing a reverse mortgage line of credit payment to the childhood game of Musical Chairs. “When the music stops,” this gentleman warned, “somebody is not going to have a chair.” What he meant, he explained that a reverse mortgage allows you to tap into a percentage of the value of your home, and when you reach that limit, the money stops suddenly.

Some mythbusting is definitely needed here. If you use the reverse mortgage to set up a line of credit, it is true that once the entire benefit is used up, no further draws will be permitted. At that point, you would have the choice of refinancing to take advantage of any appreciation in value that has taken place. If, on the other hand, you arrange to take the benefit in the form of a lifetime tenure payment, the “music” does not stop, regardless of what happens to the value of the home