“REVERSE MORTGAGES ARE BAD!” — UNTIL YOU NEED ONE
Last week, I had lunch with a client I hadn’t seen for quite a while. He had previously referred his daughter and son-in-law to me for a line of credit, and I was able to help them. During lunch, we started talking about mortgages, and I mentioned reverse mortgages. His reaction was immediate: “Reverse mortgages? They’re bad!” I asked him why, but he couldn’t really explain it. He simply had a very negative impression.
Then I started telling him about some of the people I had helped with reverse mortgages. After hearing the stories, he admitted, “I’m an ignoramus. I really don’t know much about reverse mortgages.” And that conversation stayed with me because he is not alone. A lot of people have strong opinions about reverse mortgages without really understanding how they work or how they can help.
When I got back to my office, I received a phone call from another client. Ten years ago, she came to me wanting to buy a home. Her financial situation was a mess, but I figured out a way to get her a mortgage. She bought the house, and for the next ten years, she lived there.
Now her daughter called me. She said, “My mother doesn’t have enough money to make her mortgage payments. I’m afraid the house could end up in foreclosure.” I looked at her situation and said, “Maybe a reverse mortgage is the solution.”
She owed about $280,000. I ran the numbers, and the reverse mortgage could provide about $180,000. That left a $100,000 gap. So, what did we do? I remembered that about three months earlier, the daughter’s mother had also come to me for a reverse mortgage. I had helped her obtain a line of credit. I called her and asked, “Would you be willing to help your daughter with the $100,000 she needs?” After some hesitation, she agreed.
Think about that. A mother and daughter—both homeowners, both using reverse mortgage solutions—and one was able to help the other avoid a serious financial problem. This is why I don’t like it when people simply say, “Reverse mortgages are bad.” They are not for everyone. But neither is a conventional mortgage, a refinance, or a home equity line of credit.
The important thing is to understand your options and see whether one of them makes sense for your situation. And you don’t have to wait until you are in trouble. Sometimes the most valuable thing you can have is a reserve—a line of credit you can use when you need it.
If you have questions about reverse mortgages or home equity, or you know someone who might benefit from understanding their options, give me a call.
Manny Kagan,
Your professional mortgage broker since 1983
(415) 225-7920; mannykagan@comcast.net
