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#30 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

After a close friend (like yourself in her mid seventies) confided that she had taken out a reverse mortgage on her home, you decided to explore that possibility for your own home, reading whatever materials you could get your hands on about that type of loan. You like the idea of having a ready source of funds for any large and unexpected medical and dental costs that might arise in later years (which was precisely your friend’s motivation for applying for a reverse mortgage). Your biggest hesitation in moving forward comes from the fact that you’ve worked hard to become – and stay – debt free, and a reverse mortgage would mean taking on a new, hefty debt obligation.

Reverse mortgages are about converting an otherwise illiquid asset (if not your largest, your home is undoubtedly one of your largest assets) into one that addresses a need. Ask yourself – what alternatives are available to you to help defray future medical and dental bills? To what extent would those costs be covered by insurance, including Medicare, supplemental health insurance, and Long term Care insurance? Absent tapping into the equity in your home, would you be able to fund these costs without liquidating all your savings/investments – and without borrowing money at that time? With or without a reverse mortgage, do you expect to be able to cover all property taxes, homeowner’s insurance,and maintenance on the home without ever incurring any debt?

There are estate planning considerations as well that must be part of your decision; your friend’s situation may well be different from your own. Is it your intent to “age in place” in this very home? Do you want this home to be inherited by a child who might want to live there?

Yes, a reverse mortgage is definitely a debt, and all debt needs to be carefully considered – and carefully managed. It’s reassuring to know that Home Equity Conversion Mortgages or HECMs, unlike other forms of debt, are non-recourse loans, which means both you and your hairs are protected from ever being “upside down”, owing an amount greater than the value of the home itself.

As you have undoubted learned in your readings on the subject, reverse mortgages were created around thirty years ago specifically to allow older Americans like yourself a way to meet and manage current and future financial contingencies.