“A smart way for seniors to tap home equity” – that’s the headline on a just-published column by CBS Moneywatch columnist Kathy Kristof touting the advantages of the reverse mortgage. If you’re considering this powerful financial tool, this article will provide some compelling arguments.
Kristof’s column appeared a few days ago on the CBS News website. In it she spotlights a 70-year-old Mississippi retiree, Richard Blackmon, who was facing a mounting burden of debt and a rapidly diminishing bank account. Blackmon said when he first heard about “a loan that could allow him to tap home equity without the need to repay until after he died, he initially thought it was a scam.” But desperate for a solution, he investigated further, and discovered the financial instrument that saved his home and his retirement. “I can’t rave enough about this program,” Blackmon told CBS’s Kristof. Blackmon had discovered the reverse mortgage.
As the CBS article points out, reverse mortgages – also called Home Equity Conversion Mortgages, or HECMs – had earned a controversial and somewhat sketchy reputation in early years. That’s partly because they were often aggressively marketed by unscrupulous lenders, and the loans themselves sometimes left a surviving spouse unprotected when the other spouse passed away. Weak regulations made it possible for heirs to be left holding the bag, owing more than their deceased parent’s home was worth. All that, plus high fees, caused many financial planners to advise their clients to stay away. But in more recent years that negative cloud has lifted and even former skeptics like financial expert Jane Bryant Quinn in this article from 2013 are now enthusiastic advocates of reverse mortgages, for the right people and in the right circumstances.
Kathy Kristof, writing for CBS News, says that the “smartest way” to use an HECM is to secure a line of credit, ideally before you need it. She cites a case where one man, a retired Teamster, began to worry that his retirement income wasn’t going to be enough, so he took out a reverse mortgage line of credit and let it sit unused. A few years later, his former employer’s pension plan ran into major trouble and slashed benefits. This gentleman was prepared, and his HECM line of credit allowed him to make up the difference in unanticipated lost income.
Kristof is also an advocate of using the HECM to help retirees ride out the ups and downs in their stock-based investments. “The loans can also help retirees handle market reversals,” she writes. When the market is declining, instead of selling stocks at a loss, “seniors with a reverse mortgage line of credit can simply tap their home equity…to generate the income they need to pay bills. Once the market recovers, the senior can go back to tapping the investment accounts.”
Is a reverse mortgage right for everybody? The answer is no – there’s no financial tool that meets that standard. Reverse mortgage experts do agree that many senior homeowners who could benefit greatly from an HECM fail to look into this type of financial tool, either out of ignorance or misunderstanding of today’s reverse mortgage landscape. We found this quote in an article on the industry website Reverse Mortgage Daily: “Even with all of the positive press surrounding HECMs in recent years, and the earnest educational efforts of many operators in the industry, a knowledge gap remains between HECM advocates and the average consumer.” The best way to bridge that knowledge gap – in fact, the only reliable way, we think – is to sit down with a true expert in reverse mortgages and find out for yourself whether this tool is right for you. Here at AgingOptions we will gladly refer you to a trusted professional such as the highly regarded Laura Kiel who can give you all the information you need to make a wise decision, without hype or sales pressure of any kind.
As for the Mississippi retiree Richard Blackmon, focus of the Kathy Kristof article, he has no doubts. “This was a win-win situation for me,” he told Kristof. “I only wish I’d known about these loans sooner.”
If your dream is to have a “win-win” attitude toward retirement, we here at AgingOptions can definitely help. Not only will you win when you attain your goals of retirement security, but your family will win as well as they see you facing a well-planned future with confidence and joy. It all begins when you, working with the team at AgingOptions, create a LifePlan for your retirement – a truly comprehensive plan that incorporates your financial, legal, medical, and housing plans and objectives into one seamless strategy. On top of that, since aging is most definitely a family affair, we work with you to ensure that your family is aware of your plans and supportive of the path you’ve laid out. There’s nothing better than a LifePlan from AgingOptions to help you enjoy the kind of secure and fruitful retirement you’ve hoped for.
You can find out more, quickly and easily and without obligation, by attending a free LifePlanning Seminar. These popular seminars take place in locations throughout the region. For a complete list of upcoming seminars, and for online registration, click here – or, if you prefer, call us during the week so we can assist you by phone. Get the facts and make a plan. When you do, you’ll be well on your way to realizing your retirement dreams, with a LifePlan from AgingOptions.
(originally reported at www.cbsnews.com)
