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What is the difference between a reverse mortgage and a home equity line of credit (HELOC)?
Traditional equity lines, of course, have a required monthly mortgage payment, and the more you borrow, the higher the month-end mortgage payment becomes. Also, most HELOCs have a 10- or a 15-year term, meaning the full balance is due at the end of the term. If the home falls in value during the life of the loan, the full balance is still due.
A reverse mortgage line of credit does not have a monthly repayment obligation. Rather, the mortgage is repaid on the back end, in reverse, when the last title holder permanently leaves the home. Most commonly, the heirs sell the home and the loan is repaid at the time of closing. However, the heirs can refinance or repay the loan and keep the home.
One of the most important things to note with a reverse mortgage is that if the home falls in value there is never a deficiency due. This means that if the loan is underwater at the time it’s sold, the home will repay what it can, and any shortfall will be covered by the FHA mortgage insurance.
A reverse mortgage line of credit can be a transformative retirement resource, and may provide one of the biggest retirement buckets in a homeowner’s portfolio.
If you’d like to see if a reverse mortgage may be a fit for you – or for someone you love – give me a call. I always love hearing from you!
I know this is a bit weightier than usual—but this conversation was SO profound that it needs recounting.
Brenda and her husband were due to retire in late 2025, and they had just downsized into a beautiful new home that was perfect for aging in place.
Four weeks after moving in Brenda’s husband died, suddenly and unexpectedly. Six weeks after THAT Brenda had a massive stroke and spent weeks in the hospital and then in rehab. Now she is deeply in debt and behind on her new “forward” mortgage.
Ironically, when I spoke to Brenda today she said she and her husband had asked their loan officer about using a Reverse for Purchase home loan to buy their new home.
The loan offer’s comment?
“You don’t want to do a Reverse for Purchase. The down payment is big.”
Big? Bigger than WHAT?
Bigger than NEVER falling behind on monthly mortgage payments? Bigger than being able to live in her own home—even after the loss of a spouse? Bigger than keeping her home even though she has had to retire ahead of schedule?
Brenda may have missed the opportunity to live in this home. I don’t know—but I do know her current plight was totally avoidable. I referred her to legal counsel in the hope something may work out.
Why am I recounting this really sad story?
Because it’s life. And because “life is what happens while you’re making other plans.”
A Reverse Mortgage is a home loan. But sometimes a Reverse Mortgage is not JUST a home loan. Sometimes it changes an aging homeowner’s entire future.
If you would like to discuss your plans—or the plans of one you love—give me a call. I always love hearing from you.
If you are a homeowner aged 62 or older and are trying to refinance the home you’re in or buy a new home, chances are you know the drill: your income is fixed, savings may be limited, and your debt may be relatively high compared to your income. In other words, you are having a hard time getting a home loan.
So why, then, with the exact same financial profile, might you qualify for a Reverse Mortgage after you were turned down by other lenders?
Here’s why:
First, there’s never a mandatory monthly mortgage payment. That right there makes a huge difference. Take just a second and think about what a difference it would make if you had NO required monthly mortgage payment. You are always allowed to make a payment if you choose to do so.
Second, to qualify you only need a monthly residual income of $529 for a single person, and $886 for a couple. “Residual income” means the amount of money you have left over at month’s end after we account for your property taxes, homeowner’s insurance, HOA dues or condo dues (if applicable), and the minimum amount due each month on your credit accounts.
Be certain to note that no matter what kind of home loan you have – or even if you have no home loan at all – property taxes and homeowner’s insurance are still a monthly expense. Many aging homeowners have some kind of property tax waiver, and a reverse mortgage does not impact eligibility.
Even though this loan is specifically designed for homeowners and homebuyers aged 62 and older, not everyone is going to qualify. However, millions of Americans have chosen to use a reverse mortgage to either refinance the home they’re in or to purchase their aging-in-place home due to the financial flexibility it may provide.
If you would like to talk about whether a reverse mortgage might be a fit for your retirement plans, give me a call – I always love hearing from you!
The population of older Americans is huge—and growing. By 2030 nearly a quarter of the population will be over 60, according to the U.S. Census Bureau.
In order to study trends and trajectories, experts who study aging use the term “cohort” when looking at groups.
As a quick personal aside, through the years I have often pondered how oddly asymmetrical aging can be. In my role as a reverse mortgage loan officer, both aging homeowners and the adult children of aging parents frequently tell me that one spouse or parent is holding his or her own—or even thriving—while the other is deep in the throes of mental or physical incapacity. Consequently, looking at large groups of people will not reveal what someone’s personal aging journey may entail, but numbers do give a statistical picture of what is typical.
The pandemic profoundly impacted older adults in many ways, including financially. In the years following the pandemic older workers who had lost their job were much less likely to get rehired into their previous position. In the tight post-pandemic job market, “unretiring” became prevalent for those willing and able to take jobs traditionally held by teens, such as cashier, call center representative, barista, and receptionist. These lower-paying jobs mean over 14% of those over 60 live below the nationally-established poverty level, according to National Council on Aging.
The youngest cohort that is considered “older adult” comprises those in their 60s. Many in this age group are often working full-time and are still physically active. This means they travel, seek to acquire new skills, and start new business in much higher numbers than did previous generations. Technological proficiency is common, but so is divorce. A distressingly high number have done no end-of-life planning, 62% carry credit card debt, and 50% have no retirement savings (U.S. Census Bureau).
Those in their 70s make up the next cohort. Most people in this group have either retired or are actively making plans to retire. Serious health issues may start to surface, and 58% of women and 28% of men are widowed by the age of 75 (Census.gov). According to the IRS, by the age of 70½, 79.5% of Americans draw more than their Required Minimum Distribution from savings.
The final cohort comprises those aged 80 and older. 31% of this group still has mortgage debt, and 92% rely on their Social Security benefits for the majority of their income, according to National Council on Aging. More than 70% of in this cohort will eventually require in-home care, and the number of Americans who live to be 100 or older will quadruple over the next 3 decades (Pew Research Center).
So why all the numbers?
Here’s why…
Research put out by Morningstar Center for Retirement & Policy Studies in August 2024 states the following:
45% of American households will run short of money in retirement. The outlook for single women was even more bleak, with about 55% of them seen as at risk in retirement, compared with 41% of couples and 40% of single males.
The study goes on to state that two-thirds of Americans fear running out of money more than death, 58% worry about losing independence, and 52% fear being a burden on family.
And frankly? I’m not sure any of these numbers come as a surprise to most of us.
It’s here that a reverse mortgage may play a role in improving financial survivability in retirement.
A reverse mortgage won’t be a fit for everyone, and not everyone will qualify. But if you are—or an aging loved one in your life is— struggling financially, give me a call. Together let’s see whether a reverse mortgage might be part of the solution.
Most of us get very judgy when it comes to money. I don’t know why.
Yesterday I had a closing with a very old, very dear couple, both of whom were groundbreaking professionals in their respective fields.
Both have pensions, both have Social Security—and both had significant savings.
But she is now 93 and he is 96, and their savings are long gone. Their guaranteed income is just not enough to meet their care needs.
At the closing table the husband said to me, “We don’t want our friends to know we’re doing a reverse mortgage—but we need money. We never expected to live this long.”
Yup, I hear you. When you were born, dear one, your life expectancy was more than three decades shorter.
A reverse mortgage is home equity mortgage. But it’s a mortgage that has no required monthly payment. Because it’s a loan, it must be repaid—but it’s repaid on the back end, in reverse, when the homeowners no longer reside in the home. Any remaining equity belongs to the heirs.
One last thing: a reverse mortgage won’t be a fit for everyone. But if an aging loved one in your life is struggling financially, give me a call. Together let’s see whether a reverse mortgage might be part of the solution.
My client sat down, looked at my business card, looked at me and said, “You’re not as pretty as you used to be.”
Yup. That happened.
I laughed and said, “You’re right – that’s an older picture. I need to get new cards.”
After his comment, for the millionth time I had to reflect on the weirdness of aging.
Because aging is weird. Aging is confusing. And, frankly, aging can be kind of scary. Add money concerns to the mix and aging can be…really scary.
Many clients tell me they’re concerned – or even outright scared – about money. This concern, of course, is why they’re exploring a reverse mortgage in the first place.
This said, it would be a misconception to paint all my clients with one broad brush. Truth is there are many reasons homeowners look into a reverse mortgage – but there are roughly three categories of enquirers.
The first is a group I call the “pre-need planners.” People realize their income, savings, and investments are likely not to be sufficient as they age, and they’re looking for a tax-free source of liquidity for future use.
The second reason is debt. Often this debt was driven by a health emergency, and uncovered expenses were paid with credit cards. Now the crisis is past, and they’re left struggling with high-interest payments.
The third reason is in-home healthcare. These costs can be breathtakingly high, and it’s not unusual to see couples paying $22,000 per month for care. $22,000. Per month. Many of these clients went into retirement with hundreds of thousands in savings, but have simply outlived their money.
Many past clients have called to say their reverse mortgage has been a “miracle.” As blessed as I am to hear this, a reverse mortgage is not a miracle. A reverse mortgage is… well… a mortgage. As such, it will be repaid.
But rather than being repaid on a monthly basis, the loan is repaid on the back end, in reverse. This means homeowners can use their equity without picking up a monthly mortgage payment. The impact of having a tax-free “bucket” to draw on can be truly profound.
If your client, friend, or loved one would like to explore how a reverse mortgage may contribute to their financial wellbeing in retirement, give me a call. I always love hearing from you.
Oh, and that old business card? There’s a new one in the works.
“You do reverse mortgages? I know a lady who had a reverse mortgage and lost her home.”
“I know a lady….” If I have heard this once, I have heard it a hundred times.
And you know what? Never do I ever doubt these stories. Never.
But you know what else? Two things can be true at the same time. The lady had a reverse mortgage? The lady lost her home? Both things may very well have been true. However, that does not mean the one caused the other.
Odds are high–in fact very high–that the lady in question forgot to pay her property taxes. But no one is going to ask that, right? It’s rude.
But you know who does ask? The FHA. In fact, the FHA keeps minute tabs on reverse mortgages, including data on the small number of homeowners who have lost a home. Top of the list? Homeowners who default on their property taxes.
Property taxes are not a function of a reverse mortgage. Nor are they a function of a traditional mortgage. Rather, property taxes are simply a responsibility of homeownership. Punto.
But that’s not an interesting story. “Elderly homeowner forgot to pay property taxes and lost her home.” No clickbait there.
“Elderly homeowner with reverse mortgage loses her home,” on the other hand, stirs righteous anger in our hearts. It smells of elder financial abuse, shysterism, and shameless exploitation.
But here’s where the true shame lies: most tax jurisdictions offer tax reductions–or even full tax waivers–for the elderly. Why is this information not made more widely available to our aging?
For those still paying taxes, most jurisdictions allow taxes to be set up as automatic, recurring payments. For some of our oldest homeowners, this may mean they need a helping hand setting up recurring payments. My own father, a truly brilliant aerospace engineer, never did master the personal computer. My mother was quite good on the computer, but she wasn’t in charge of finances.
If you have aging loved ones in your life, ask them if they would appreciate help setting up recurring property tax payments. Be mindful that the ability to keep track of dates, deadlines, and requirements may diminish as loved ones age, and that the “money talk” may be one you need to have on a regular basis.
If you would like more information on the role a reverse mortgage can play in your long-range financial planning, or in the life of one you love, give me a call. I always love hearing from you.
It looked like it was heading for a bad outcome: Robert sold his mother’s home and placed her in a care facility.
The problem? Mom was on Medicaid, and her formerly exempt asset was now quite a large countable asset, which spelled big trouble for her care options.
Fortunately, Robert picked up the phone and called an elder law attorney, who listed buying another home among potential cures.
Because Reverse for Purchase has notably easier qualification guidelines, Robert’s mother qualified even on her limited income. And…yesterday she closed on a lovely new home. She is scheduled to move in shortly before Christmas.
Rarely in life is a problem too large. More often, solution sets are too small. In this case, Reverse for Purchase was the perfect fit for a problem that had few other solutions.
If someone you know is in need of options, give me a call. I always love hearing from you!
Margaret was 75 when she inherited her mother’s ranch-style home. Because the home had a perfect aging-in-place layout, Margaret and her husband decided to sell their current home and move into the smaller, single-level property. Their current home sold quickly, and they began packing for the move.
But then one tragedy after another struck: Margaret’s husband died suddenly. Margaret lost her job when her employer closed his doors. And then, just days later, the inherited home burned to the ground. And, as fate would have it, the home was uninsured at the time.
Margaret moved in with family while she had the home rebuilt, and funded the construction with proceeds from the home she and her late husband had sold. However, the funds didn’t cover the full cost, so she tried to get a loan to cover the remainder. In the meantime, the contractor finished the work and placed a mechanic’s lien against the property.
She tried lender after lender – but the loan amounts fell far short of what she needed. After all, she was living on just Social Security and a state pension. Though her income was by no means meager, she could not qualify for a loan large enough to pay the contractor.
Months went by, and finally Margaret consulted an attorney regarding her options.
His recommendation? Look into a reverse mortgage.
With a reverse mortgage there is no requirement to prove the homeowner can make a monthly mortgage payment, and consequently Margaret qualified for a far larger amount than she had with a “forward” mortgage. The reason? A reverse mortgage has no required monthly mortgage payment.
The lender must verify the homeowner can cover property charges, including property taxes, homeowner’s insurance, routine upkeep, and condo or homeowner’s association dues, if applicable.
Today Margaret is living in her lovely new home. She has paid all her debts and has no required monthly mortgage payment. When I spoke with her recently she said, “I feel like I have lived a miracle.”
A reverse mortgage is not a miracle – it’s a mortgage. It’s a mortgage that’s repaid on the back-end, inreverse. However, it’s a mortgage that can accomplish results other mortgages often simply cannot.
If you are – or someone you know is – in need of options, give me a call. I always love hearing from you!
How did she get here? How the HELL did she get here?
A year ago, as allowed for under the CARES Act, she put her home into forbearance. Now one year on she’s newly widowed, meaning she’s got half the income and all the debt, and her home is coming out of forbearance in just a few weeks.
According to correspondence from her mortgage company, she also has a $69,000 lump sum due on her existing mortgage come September 1. If she cannot come up with that amount, per her mortgage company, her home is headed toward foreclosure. She has tried to refinance both with her current lender and with several other lenders.
But here’s the thing: it can be very difficult to refinance if you are not currently making payments. This means many thousands of our seniors may soon be in dire distress.
So back to our 78-year-old.
This past week her banker mentioned the possibility of refinancing using a reverse mortgage.
To answer your question: yes.
Yes I can qualify her.
Here’s why: with a reverse mortgage she does not have to have income enough to make monthly mortgage payments…because with a reverse mortgage there is never a monthly mortgage payment required. Rather, the mortgage will be repaid on the back end – in reverse – when the home is sold. All remaining equity belongs to the homeowner, the heirs, or the estate.
Because homeowners still own their home, they continue to pay homeowner’s insurance, property taxes (unless tax-exempt), and HOA or condo dues, if applicable.
We may well be in the calm before the storm. But our older homeowners currently in forbearance do not have to lose their homes if they can refinance using a reverse mortgage.
Please, please be proactive in asking the hard questions of your loved ones currently in forbearance. You know, as do I, that many older homeowners are not comfortable asking for help – until they’re out of all options they know to pursue.
Do please pass this message on to lenders, bankers, planners, attorneys – anyone in your life who deals with older homeowners.
And do call at any time if you have a client, friend, or family member aged 62 or older who wants to talk. I’m always available.
Laurie MacNaughton 703.477.1183 