More and more I am coming across clients who are interested in using the reverse mortgage as a retirement planning tool, rather than as an absolute need for additional cash.
Out of my last 10 reverse mortgage loans, 4 of them already had decent incomes, low or no mortgages. One thing that seems to be a common thread is the idea of planning for the future.
One client had a beautiful $800,000 home right on the golf course with no mortgage payment. Over the last 2 years though his investment portfolio really took a hit and his income from that went down by half. He was loathe to bail out on those investments at the bottom, knowing that until he sold, he really had no realized losses. His solution was to take a reverse mortgage out and use the tax free monthly tenure payments to supplement his income back to a more normal state. His plan is to maintain his lifestyle and when his investments recoup their value and that income returns to normal he will reduce the tenure payments he is receiving on the reverse loan.
I spoke with another client today, who basically wants to do the same thing. He is looking to have some of his equity reserved for his use, should he need it in the future and to supplement his lower returns on his investment income. Some smart retirees are figuring out that even with the high closing costs, the fact that the interest rates are low, and the loan proceeds income is tax free seems to be a logical move to help them maintain their lifestyle and protect their other investments.
A couple of clients are considering using a reverse mortgage to help them to delay taking their Social Security so they can take advantage of a higher SS payment later. And some of those folks are thinking that even if they sell their home when they do take the Social Security, they will be able to still get enough equity from the sale to buy a single story new home to retire in and finance that with a reverse mortgage.
Another couple I worked with at the beginning of this year, saw their monthly income reduced from $10,000 per month to just $5,000. Not a bad income, but still very difficult to adjust too. My original recomendation was for them to sell the home but the older borrower was in his 90's and just couldn't bear to go thru packing and moving after 40 years in the house. With the new higher lending limits this year for FHA reverse mortgages they were able to increase their income, remain in the home and will still have tons of equity down the road.
I've already written about the dear lady in LA who got her reverse just to have money availabe to provide for her home health care should she ever need it. She swears that she will never move to a nursing facility, no matter how nice.
Lots of interesting things to consider....
As always I love to hear your comments, ideas, suggestions. Tell me what you think!