Reverse mortgages have gotten a bad reputation over the years. And many years ago, that reputation was deserved. But today, reverse mortgages have become one of the most regulated financial products out there, and several of the early abuses by lenders and loan officers have been curtailed significantly. Required independent counseling also helps ensure that senior borrowers fully understand how reverse mortgages work and the pros and the cons.
Still, for many, the stigma lingers. Even Dave Ramsey, who I’m sure many of you know, has YouTube videos demonizing reverse mortgages. Now I read Dave’s books starting in my late 20s, and Linda and I practiced a lot of his teachings on getting debt free. By our mid-30s, we were debt free (except for our mortgage), and at 41, we quit our corporate jobs, sold our house and all our stuff, bought a fifth wheel and a dually pick-up truck with funds left over from the home sale, and became full-time RVers for the next 15 years while being completely debt free.
Dave wouldn’t have approved of giving up our high-income-producing jobs and buying depreciating assets, but being debt free gave us the freedom to do a lot of extraordinary things in our lives at a reasonably early age. And, though we gave up our prime “earning years”, we came off the road with a bit more money than we started with by being frugal and responsible. And the experiences we had are worth far more than any amount of financial riches we may have given up.
Now, I owe Dave a lot of gratitude, but he is not always on the cutting edge of things, and he is wrong about certain aspects of reverse mortgages today. I can link to over a dozen videos that explain why his thoughts on reverse mortgages are mis-guided. He is correct about some things, but he leaves out a lot of useful information, and he does tend to over-simplify many issues.
I say all of that to say this. Too many people still today hear “reverse mortgage” and automatically dismiss their potential usefulness. Over and over, I see folks that could really use a full, professional evaluation get discouraged by friends and family members who don’t know all the facts and often don’t even know the circumstances of the person they are trying to “protect”.
The vast majority of people don’t understand reverse mortgages, or they have incorrect pre-conceived notions. And I would bet 99% of people have absolutely no idea how flexible they can be, how customizable they are, and how many situations there are to which they can be applied. Heck, I didn’t know until I started digging into them for our own use.
I tell all my clients, “Let’s get everyone involved!” – family members, influential friends, and financial professionals. I want to engage with all the supporters and skeptics and answer their questions. At least then, the team can make an informed decision together.
Moving on. Let’s start this next section by saying reverse mortgages are not for everyone, but they can help a lot more people than are currently taking advantage of the options. Also, there is a reason they are only available for seniors who have a significant amount of equity in their homes.
They are for those that have done pretty well in life as far as their net worth, but most of that net worth is often tied up in their homes and they could live better in their golden years by accessing that home equity. With that said, reverse mortgages can be used productively by a wide range of individuals that don’t appear to “need” them. That’s one of the big myths I’m trying to burst. Reverse mortgages are NOT JUST for those that are “desperate” or that “have no choice”. They can be quite worthwhile for those that already have great cash flow and/or other significant non-house assets to further improve their overall financial picture.
Let’s look at this list of situations where a reverse mortgage COULD be a very useful tool in retirement years:
1. Cash Flow & Everyday Living
Directly improving monthly flexibility, removing financial pressure, and enhancing day-to-day lifestyle.
• Eliminate Monthly Mortgage Payments:* Free up monthly income without needing to move.
• Supplement Retirement Income: Create a steady cash flow stream to comfortably cover daily expenses.
• Compensate for the “Widow/Widower Penalty”: Offset the sudden drop in household income (like Social Security or pensions) when a spouse passes away.
• Boost Emergency Preparedness: Set up a growing line of credit to sit unused until an unexpected need arises.
• Make Home Improvements: Fund renovations or upgrades to enjoy your living space more fully.
• Provide Stress Relief: Relieve the pressure on “house rich, cash flow tight” homeowners.
2. Wealth Preservation & Financial Strategy
Using home equity as a smart, defensive asset rather than a last resort.
• Protect and Preserve Investments: Draw from home equity during market downturns so portfolio investments have time to recover.
• Diversify Assets: Tap into illiquid home equity to balance out your overall wealth portfolio.
• Assist in Tax & Estate Planning: Strategically manage income brackets in retirement and optimize asset transfers.
3. Health, Security & Aging in Place
Planning ahead for changing personal and medical needs without sacrificing independence.
• Age in Place: Fund home modifications (ramps, walk-in tubs, main-floor living) to stay in your home long-term.
• Plan Healthcare: Cover out-of-pocket medical bills, prescription costs, or in-home care support.
4. Family, Life Transitions & New Beginnings
Navigating major family changes, milestone purchases, and legacy goals.
• Reverse for Purchase: Buy a new primary residence with no monthly mortgage payments while keeping more cash reserves.
• Help Family: Provide living inheritances, help grandchildren with college, or assist children with home down payments.
• Assist with Late-in-Life Divorce (“Silver Divorce”): Enable both parties to divide real estate assets and secure separate housing smoothly.
Some of those items may be more “needs based”, but most of them apply to such a wide range of seniors that I struggle to think of anyone that wouldn’t benefit from at least gaining a better understanding of reverse mortgages. Almost everyone I talk to that is interested enough to listen can think of someone they know that could be helped by a reverse mortgage in their retirement years.
As I proceed on this unplanned journey of reverse mortgage education, I hope to write blog posts with more details on each item in the list above, and I hope to become brave enough and competent enough to post some videos as well.
As always, thank you for reading.
Contact me to discuss. No Obligation, Just Education!!
Howard Payne
NMLS #2792928
*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.
Howard Payne, NMLS ID 2792928. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Florida Mortgage Lender Servicer License MLD1827. Kentucky Mortgage Company License MC707287. North Carolina Mortgage Lender License L-186305. 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 #4582657663 Expires 10/2029