Seniors can get big benefits from reverse mortgages.
Financial planner Todd Burkhalter at Drive Planning in Johns Creek, Ga., says he's seen "countless situations" where a reverse mortgage is "a perfect fit" for a senior homeowner. Consider five significant reverse mortgage benefits:
1. Reverse mortgage pays for long-term care insurance
Burkhalter recently recommended this type of loan to a widow in her early 70s who owned a condominium, but wanted to leave cash to her grown children who owned their own homes. The income from the reverse mortgage was used to purchase long-term care insurance, which the woman had wanted but felt she couldn't afford. If she doesn't utilize the insurance, her heirs are entitled to receive a death benefit.
"The reverse mortgage allowed her the freedom to use her retirement accounts for trips and enjoyment with her 19 grandkids while she was alive and leave an inheritance," Burkhalter says.
2. Senior gets monthly income and a vacation
Beth Paterson, a certified reverse mortgage loan professional at Reverse Mortgages SIDAC in St. Paul, Minn., recalls a man in his mid-70s who used a reverse mortgage to make some home improvements that would enable him to remain in his home longer, take a vacation to Yellowstone National Park with his nephew and supplement his income after his wife died and his household Social Security benefit was reduced. Though he and his wife did not have children of their own, the vacation with his nephew had been long-anticipated and was very important to him, Paterson recalls.
3. Reverse mortgage facilitates in-home care
Another Paterson client was a widow in her 70s who was mentally alert, but needed some help with food preparation and bathing in order to remain in her home. Her adult children, a son and a daughter, worked with their mother and Paterson to arrange for a reverse mortgage which was used to pay for in-home assistance.
"Her children encouraged her to get the reverse mortgage so she could stay in her home," Paterson says.
4. Reverse mortgage pays for home improvements
Paterson also worked with a woman who obtained two reverse mortgages, one in Florida and later one in Minnesota.
"She wanted to move from Florida to Minnesota to be closer to her son," Paterson says. "The reverse mortgage gave her some funds to fix up the home she bought and a line of credit for future long-term care needs."
Her home improvements included remodeling an outdated bathroom and refinishing her new home's hardwood floors.
This senior was one of Paterson's younger reverse mortgage borrowers as she was only in her late 60s. With the reverse mortgage in place, the line of credit is available if she needs funds for in-home help, healthcare services or other future expenses.
5. Reverse mortgages help seniors keep their home
Many consider the most important benefit of reverse mortgages to be that they offer seniors the ability to stay in their homes, says Casey Fleming, mortgage advisor at C2 Financial Corp. in San Diego.
Reverse mortgages, also known as Home Equity Conversion Mortgages, or HECMs, allow seniors to borrow against their home without selling it or making monthly mortgage payments. The money from the mortgage can be used for daily living expenses, home remodeling, maintenance or repair, travel, family gifts, elder care or any other purpose.