Understanding Reverse Mortgages and Alternative Home Equity Solutions

What is a Reverse Mortgage and how does it work? What are the characteristics of a Reverse Mortgage that make it so unique?

Watch this video to learn more about the difference between a traditional Home Equity line of credit and a Reverse Mortgage:

Simplifying Reverse Mortgages

A Reverse Mortgage is just a mortgage loan. It’s the flexibility of the Reverse Mortgage that makes it unique and different.

Payments Are Optional

You have no monthly mortgage payment requirement, allowing you to improve monthly cash flow for retirement. You can choose to make payments if you want to, but there is no obligation. The only requirements are that the loan can finance a primary residence and that the borrower is responsible for on-going expenses, including property maintenance, annual property taxes, homeowners insurance, and, if applicable, Homeowners Association (HOA) dues.

You Choose How You Use Your Money

A Reverse Mortgage frees up access to money by providing access to your home’s available equity. You can choose to receive monthly income payments, take a lump sum payment, or any combination of both.

Reverse Mortgage Money is Tax Free

The money you receive from your Reverse Mortgage is considered tax-free, so you don’t have to account for it on your annual tax returns.

Avoid the Drawbacks of Home Equity Lines of Credit (HELOC)

HELOCs can be self-defeating. They require you to make monthly payments, which can challenge your retirement cash flow. In addition, HELOCs can be canceled or frozen by the lender at any time, making them unreliable sources of money for retirement. On the other hand, a Reverse Mortgage cannot be canceled by the lender.

We look forward to educating you on how the reverse mortgage can be a useful tool in helping you plan and strengthen your retirement finances.

Please feel free to contact us anytime with questions.

The Retirement Reality

Today, older Americans face a great deal of uncertainty as they move through their retirement. With rising healthcare costs, a volatile stock market and ongoing mortgage and credit debt, it’s not surprising that 87% of Baby Boomers are not very confident that they will retire in a comfortable lifestyle. Many are afraid that their savings accounts, investment portfolios and government benefits will not provide enough money to sustain their changing needs and financial obligations as they age.

If you are like most people, retirement planning generally relies on assets such as: 401(k)s, IRAs, traditional pensions, Social Security benefits, as well as regular taxable savings and investment accounts. But as a homeowner, you have another, often overlooked, retirement planning asset: Home Equity. U.S. homeowners age 62+ have more than $7 trillion in home equity, making it the largest asset for most households entering retirement. For the average retiring couple, home equity makes up 70% of their net worth—with other assets like IRAs, savings and personal property only making up 30%. With such a large proportion of personal wealth tied up in one’s home, it’s time to rethink how home equity can be used as another tool in your financial arsenal.

New Ways to Access Home Equity

Over the last 30 years, reverse mortgages have gained acceptance as part of strategic retirement planning. In fact, a growing number of respected retirement researchers, such as Harold Evensky, Dr. John Salter, Dr. Wade Pfau, and the Center for Retirement Research at Boston College have all conducted numerous studies to evaluate the pros and cons of reverse mortgages for the benefit of consumers. They have concluded that the reverse mortgage is an important option, with multiple uses that can often help consumers be better financially prepared in retirement, and avoid outliving their money.

1Source: Campbell, Todd. “9 Baby Boomer Retirement Facts That Will Knock Your Socks Off.” The Motley Fool, 19 Mar. 2016,
2Source: U.S. Census Bureau.
3Source: Go Banking Rates. (2018) “The No. 1 Cause of Financial Stress in Every State.”
4Source: Sandra Timmermann, “Shocks and Loss in Retirement: Preventing Despair, Promoting Resilience,” Journal of Financial Service Professionals 70, No. 5 (2016).
5Source: Susan Hoover, “Long-Term Care Insurance (LTCI): The Good, the Bad, and the Ugly,” Enterprising Investor blog, CFA Institute, September 19, 2016.
6Source: National Reverse Mortgage Lenders Association (NRMLA)/RiskSpan Reverse Mortgage Market Index (RMMI).
7Sass, Steven A., “Is Home Equity an Underutilized Retirement Asset?”, Center for Retirement Research at Boston College, Number 17-6, March 2017
8US Census Bureau, “Wealth, Asset Ownership & Debt of Households Detailed Tables: 2015”
9Salter, John., Evensky, Harold., & Pfeiffer, Shaun. (Aug 2012). Standby Reverse Mortgages: A Risk Management Tool for Retirement Distributions. Journal of Financial Planning,
pg. 40. | Pfau, Wade. D. (2016) Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement. Retirement Researcher Media.

Advantages of a Reverse Mortgage

You can gain many advantages by taking a Reverse Mortgage, but you need to understand how it works in rder to determine if it is the right option for you.

What is a Reverse Mortgage?

A Reverse Mortgage is a unique loan program specifically designed to assist in improving retirement income and monthly cash flow for those age 62 or better. It allows the borrower to utilize home equity to help support their retirement by adding an additional income resource beyond social security and other retirement assets such as a 401(k). The primary residence is the single biggest asset for most seniors. Tapping into the equity in that residence can help your money go further in retirement.

The Main Advantage of a Reverse Mortgage

The main advantage of a Reverse Mortgage is the elimination of monthly mortgage payments. Whether you have an existing mortgage loan or your home is paid in full, the funds you access from a Reverse Mortgage are tax-free and require no monthly mortgage payment. Keep in mind, your responsibility is to:

  1. Occupy the home as a primary residence
  2. Keep up with ordinary maintenance
  3. Pay ongoing property taxes, homeowner’s insurance and homeowner’s association dues (if applicable)

How and When Do I Have to Pay for the Reverse Mortgage?

You are responsible to repay your Reverse Mortgage when your home is sold or refinanced. If you (the borrower) should pass and your heirs are settling the estate, the loan needs to be repaid, but the beneficiaries will not inherit any debt obligations.

To find out more about how a Reverse Mortgage can improve your retirement or to clarify how a Reverse Mortgage works, please contact us anytime.

Check out our FAQ page for other commonly asked questions and answers

Calculate How Much You Qualify For.

Why are Reverse Mortgages Popular Amongst Baby Boomers

Reverse Mortgages continue to grow in Popularity. The Baby Boomers are all retiring and they have an immense amount of wealth tied up in their home. Home values are at all time highs. The baby boomers are retiring at a rapid pace today. It is said that 10,000 baby boomers are turning 65 each day. This is the largest group of retirees ever in the United States. In addition there is over $8.05 in Senior Home Equity. What does that mean? It means there is a large sum of money available in housing equity that can be used by seniors to support and improve their retirement certainty and cash flow.

Various Options

More and more retirees are becoming more educated on the various options for reverse mortgages and financial planners are now incorporating reverse mortgages into the financial plans they create for their clients.

Let’s face it, retirement can be challenging. There is a lot to plan for and retirees are living longer and longer. It is not uncommon to see people living well into the 90s or longer.

40% of baby boomers

Inflation in the price of goods and services requires retirees to make their dollar stretch further and further and the monthly income just does not keep up with the increased cost of goods and services.

Retirement statistics can be scary. 40% of baby boomers have nothing saved for retirement, 36% rely solely on social security, 74% state they work even though they are considered “retired” and 97% have no plan for the long term, yet 60% will require long term care at some point in their lives. With all these considerations and challenges we find most of our clients find an improvement in their cash flow which could exceed $200,000.

Check out our FAQ page for other commonly asked questions and answers

Calculate How Much You Qualify For.

The truth about Reverse Mortgages: facts vs. fiction

There are many misconceptions about Reverse Mortgages and how they work. If you’ve heard negative stories or myths—and have concerns—you are not alone. Most of our Reverse Mortgage clients started where you are, but have taken time to learn the truth, and the real benefits of this retirement planning option.

We want to help you get past the misconceptions, make informed decisions, and find the retirement certainty you desire.

Common Misconceptions

One of the most common misconceptions about Reverse Mortgages is that the bank gets your home.

This is not true. The way in which you hold title to your property will not change with a reverse mortgage. The title designates ownership to the property, and the borrower—an individual, a couple, or a trust—holds that title. That never changes. As with traditional mortgages, the lender (or bank) is financing your home. The bank does not own your home—you do! The big difference between a Reverse Mortgage and a traditional mortgage is that you have no monthly payment requirement, which allows you to improve your monthly retirement cashflow.

Another common misconception is that you are disinheriting your kids when you get a Reverse Mortgage.

Nothing is further from the truth. Your beneficiaries will still inherit all remaining equity in the property after you have passed. In some cases the equity position when you pass may be even more than the equity you have in your home today, even after not paying the Reverse Mortgage for an extended period of time. Your beneficiaries have the option to sell the home, refinance and keep the home, or settle the outstanding loan with a lump sum payment. If there is no remaining equity in the property, your beneficiaries can walk away with no obligation.

Misconception #3: Some people think that they will have to move if the loan is “all used up.”

You will never have to move if you don’t want to. If you, like most of our clients, want to live out your life in the home you love, you can. Even if you have utilized all of the money available in the Reverse Mortgage, you never have to move. The only requirements as a borrower are to occupy the property as your primary residence and pay the on-going expenses (e.g., property taxes, homeowners insurance, general maintenance and homeowners association dues, if applicable).

Additional Facts

You can never owe more than the value of your home.

You never want your loan amount to increase beyond the value of your house. Although that is unlikely to happen, even in extreme circumstances, if it does occur you are protected. Reverse Mortgage loans are considered non-recourse, meaning that the loan is insured for your protection and you can never owe more than the value of your home. Should your home value ever drop below the outstanding balance of the mortgage loan, the mortgage insurance will cover any shortfall. The insurance protects you (the borrower), your estate, and your beneficiaries. Beneficiaries can never inherit any debt, and the lender can never attach to any other financial assets of the estate. The mortgage insurance is a very important feature and offers borrowers security and protection from any downside in the real estate market.

You can choose to make mortgage payments on your Reverse Mortgage—or not.

A reverse mortgage is flexible and does not require you to make payments. There are reasons to consider making payments—either ongoing or for a certain time period— but every situation is unique. We can help you tailor the structure of your Reverse Mortgage to fit your specific retirement needs.

Check out our FAQ page for other commonly asked questions and answers

Calculate How Much You Qualify For.