What am I doing with my day today and most days? Mortgages – all kinds of mortgages. I have been a mortgage broker over 25 years now and it always amazes me of the information that is out there, it always has a slant on it. There is always a bias on whether it is good or not, whether there are fees or not but often readers don’t see the slant and they believe everything they read.
Reverse mortgages trigger the worst information followed by the VA loans. FHA is right up there as well and with everything there are always pros and cons. Last October, reverse mortgages were discussed here on this website, and it is interesting the slant on it. It was an interview by the Better Business Bureau, and it sure tried to talk you out of a reverse mortgage. This is a great loan for my older adults to tap into equity that they have in their homes when they are running low on funds. And you really should not have this discussion without discussing why you want one – or even need one and that is where a financial planner comes in. Most of these interviews are not with the planners or certified public accounts, they are just with the lenders. Lenders lend and reporters really don’t understand these things either, so I enter the picture with a background in financial planning and mortgages and real estate and insurance.
No one would ever need a loan at all if they had more finances – we should all aspire to pay cash right? Wrong ! It is not really the smart person that pays cash when that cash can be invested and work more for you, gaining more money for you. But where is the outcry for people that are taking equity out of their homes to pay off credit cards, pay tuition or even do home improvements? Everyone uses what they have and for so many retired folks – they have social security and maybe a pension. Some might even work still but as you age – you slow down and have health issues and what I find is that we are not good planners. We don’t plan for a heart attack, stroke or even COVID – we all spend more than we make and then run into problems. So as many people plan or don’t plan – most eventually have health issues that cut their careers short and then don’t have enough finances and must live on social security which never should have been a way of life or income – it was a just in case that everyone is now using as “the only” thing.
A reverse mortgage can and is used to tap into equity in your home and we do that while working but if you are still employed and not 62 – it is called a cash out refi! And no one has a problem with that because you loan yourself the money and pay it back. With a reverse mortgage – there is no paying it back until you die. Only our reporters and journalists could make not paying back a loan bad. The seniors only have to pay taxes and insurance on the house and keep things moving like everyone else, but the equity is taken out and paid back once they cease to live in the home.
The last report that I saw eluded to the fact that the adult kids might not like it – the parents were spending their inheritance – really? So when the kids are divvying up the prizes before the parents even die – same could be said for life insurance – let’s cash that out too – parents don’t need long term care – let’s just give the kids everything while the parents have no extra money.
Many are now using this loan as a financial planning tool and actually making money on the line of credit inside the reverse mortgage. Banks are not even paying what this loan does. This loan frees up money in the seniors retirement accounts to stay invested and make them even more money. We also use this loan to buy property at a reduced price allowing a reverse mortgage to buy a property leaving more money to the seniors.
I know many are not upset about this loan at all or even know much about it. Most of my seniors need the equity in their homes and this is a great alternative to paying it back like a normal loan. The don’t have to use their limited resources for living expenses but somehow the media takes the stance that the adult kids need that money now – it is such a shame that there is a stigma to this loan. It helps so many people.
Maybe next we can get upset about the VA loans – they don’t have to put any money down – and many have bad credit…. Guys – these loans are available to veterans as a tool and they should get to use them too.
Living in a home is not a right – it is a privilege. Let’s not be haters on all the types of loans out there. People need to use these tools to make it in life. We are living longer than ever and we need all the help we can get.
This article is an overview for a general educational purpose only. The information presented should not be relied upon without the advice of counsel.
Debbie Bloyd is a contributing author to Weekly Real Estate News. She can be contacted at 469-768-0337 or [email protected]
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