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Some mortgage industry professionals are obtaining reverse mortgages for themselves and encouraging friends and family members to do the same. In many cases this happens even when a homeowner has no immediate need for one. Could there be significant non-traditional uses for reverse mortgages that create an advantage for more than just the desperate and needy?
Sadly, when only trained mortgage professionals are the ones who understand the financial planning advantages of a reverse mortgage, we find ourselves with a knowledge gap and an industry perception problem. You see, the public believes that applying for a Home Equity Conversion Mortgage (HECM) is an act of desperation. But nothing could be further from the truth.
Researchers within the financial planning community agree and have been trying to change public perception. Yet, in meeting with advisors, I still get the same puzzled response, “Why would you want one when you don’t need it?” I then hand them a copy of my book.
Reverse professionals have their own plans
While I’m not yet old enough, I do plan on utilizing my own home equity to create a more efficient retirement. But I also asked a handful of Certified Reverse Mortgage Professionals (CRMPs) how they would structure their own. Here are their responses:
Professional #1
“I will obtain a HECM for the line-of-credit growth. I would pay the closing costs upfront and carry a minimal balance to make this an ‘investment’ in the LOC growth for future use.”
Professional #2
“My current residence is not where I want to spend the rest of my life. When I retire, I will sell it and use a ‘HECM for purchase’ to buy my new residence. This will provide a sizable contribution toward the sales price of a home where I will spend the rest of my life. Any cash left from the sale will be reinvested for additional retirement income.”
Professional #3
“I’d take a HECM for the LOC, but I expect to have a mortgage balance at 62, so the reverse mortgage would pay that off. I would continue making payments into the HECM LOC to ensure that money is there when I need it.”
Professional #4
“I’ll be signing the paperwork the day after turning 62. I’ll have a loan balance, but I will make regular payments. This will reduce my balance and boost my LOC as a 2nd source of retirement savings. Starting early will maximize the LOC’s compounded growth.”
As you can see, the reverse mortgage is more than just a solution for the desperate and needy homeowner. It can give retirees confidence that they will have a more successful retirement.