Reverse Mortgages – Only Consider as a Last resort

reverse mortgageBy David John Marotta and Beth Anderson Nedelisky

Before reverse mortgages, pensioners wishing to tap into home equity were presented with two options: either sell the house or get a home equity loan. But since their humble beginnings in the late ’80s, reverse mortgages provided seniors with an additional tool for accessing home equity. The going offer: get cash now, make no monthly payments, and keep your home sweet home. For retirees struggling to make ends meet, a reverse mortgage can provide a much-needed way forward.

A reverse mortgage should be considered only as a last resort. With early retirement planning, such ‘last resort’ options can be easily avoided. Still, reverse mortgages are a far cry from the blinking neon signs offering fast cash in exchange for a car title. At least with a reverse mortgage the borrower gets to keep the title and avoid the ugly monthly payments.

To understand the way a reverse mortgage works, let’s look at its opposite: the traditional home mortgage. Both are mortgages. But with a standard home loan — also known as a forward mortgage — over time the homeowner’s equity rises and the debt falls. A reverse mortgage does just the opposite. With a reverse mortgage, the debt rises and the homeowner’s equity falls.

Unlike a home equity loan or a home equity line of credit which immediately begin monthly collections on the loan, no payment is due on a reverse mortgage until the borrower sells or moves. Borrowers are given a guarantee of lifetime occupancy of the home. But, once the borrower no longer resides at home, the loan must be repaid. Typically, repayment is made from the proceeds from the sale of the home. The good news here is a reverse mortgage will not hold the borrower personally liable nor can they owe more than the market value of the home.

Minimum qualifications require borrowers to be age 62 or over and must either own their home free and clear or have little remaining debt against the house. But, meeting the initial requirements won’t mean the loan is a done deal. Borrowers should be prepared for an extensive interview and educational component before they can sign on the doted line.

Reverse mortgages are becoming ever more popular, in part, due to the customizable distribution options. Seniors may choose to receive one lump sum or monthly advances — either for a limited time or spread out over the course of their lifetime — for as long as they reside in the home. Others may choose to open a line of credit or pick a combination of payment options to suit their cash flow needs.

But, the convenience offered by a reverse mortgage comes with a price tag. Although loan fees can be financed as part of the loan, origination fees can easily cost borrowers in the neighborhood of $12,000- $18,000. Add to that the principal loan amount, interest, and maintenance fees, and the total cost will likely account for a sizeable portion of the home’s total value, if not all of it.

In addition to the costs of maintaining the home, borrowers are also expected to continue home owner’s insurance and property tax payment in addition to paying for routine maintenance on the home.

Currently, reverse mortgages come in three flavors: single-purpose, proprietary, and federally-insured loans. Single-purpose reverse mortgages are very low-cost. But, unlike the other two, they can only be used for one purpose, such as paying property taxes or making house repairs. Proprietary loans are offered through private banks. Although they are more expensive, they lend larger sums. Of the three loans types, the most common is the federally insured Home Equity Conversion Mortgage (HECM).

The actual amount a homeowner can hope to borrow using a reverse mortgage will be significantly less than the market value of the home itself. Although a HECM offers lower interest rates than private lenders, borrowers are subject to regional 203b loan caps ranging from $200,160 to $362,790. Ultimately, the total loan amount will be determined by the value of the home or the regional loan cap (whichever is less), the borrower’s age and the going interest rate.

So how do you know if a reverse mortgage is right for you? AARP advises prospective borrowers to consider three questions: How much would I get?, How much would I pay? and How much would be left at the end of the loan?

Although the lender almost always wins, a reverse mortgage does offer a Band-Aid solution to pending cash flow problems. Some seniors take the loan to eliminate remaining forward mortgage payments still owed on their home. The majority, though, choose a reverse mortgage to pay medical bills. In either case, a reverse mortgage allows the homeowner to live at home while shoring up immediate, and even long-term, cash flow shortfalls.

There are some cases in which you should never take a reverse mortgage. Avoid a reverse mortgage if you are close to the minimum age requirement. Assuming a reverse mortgage early on will provide you little income and will ensure you will have no equity left in your home at the end of the road. If you currently have little equity in your home, a reverse mortgage is also not worth the cost of the loan origination fees. The fees alone will likely eat up what little equity you have. Finally, avoid a reverse mortgage if you expect to move in the near future. The hefty costs of getting the reverse loan will be wasted and the loan will come due as soon as you move out of the home.

Before going forward with your reverse mortgage, consider your options carefully. There are many creative ways of managing cash flow needs without taking a loan against the value of your home.

As always, begin by looking at your budget and cutting unnecessary expenses. Generating additional income may be as simple as renting out a portion of your home. Or, you may consider moving to an area with a lower cost of living. Sell high and buy low. Then, invest the profit from the sale of your home. By doing so, you may be able to create a permanent cash stream without taking on any debt at all!

Finally, investigate community assistance programs. You may find that you qualify for additional social security benefits or for property tax relief.

More information about reverse mortgages can be found by visiting the AARP website at AARP. Of course, the best way to avoid a reverse mortgage is by planning early for retirement. You can also find out more information about traditional mortgages at for those interested.

David John Marotta and Beth Anderson Nedelisky work at Marotta Asset Management, Inc. of Charlottesville which provides fee-only financial planning and asset management.

Image courtesy of *Susie*

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41 Responses to Reverse Mortgages – Only Consider as a Last resort

  1. Zook says:

    If you are prepared for retirement and saved at least 10% a year in your working years, I don’t understand why anyone would want to do this. You are right, it’s a last resort IMHO. Having dealt with a couple folks looking into this and a couple who actually pulled it off, there are other options.

    First one would be to sell the house and move into something more manageable. Sell that $475,000 home and buy a nice garden style condo for $300,000.

  2. philip vernot says:

    Why should the reverse mortgage be a last resort? Why should you begin by cutting expenses? Isn’t the idea of retirement to enjoy yourself? Was this written with the heirs in mind?

  3. Corey Matelli says:

    Thank you for your article. It is evident by your headline that you are not a proponent of reverse mortgage, which is absolutely fine. At no point do you pretend to be objective, which I actually appreciate. Therefore, I would like to present the “other” side to your comments.

    One element your article omits is that there are many reverse mortgages with reduced…and even waived fees. The reason fees can be so high is because the most common reverse mortgage products, the HECM, require a mortgage insurance premium to the government. This can amount to over $7000.

    Perhaps I’m being defensive, or perhaps it is the tone of your article which makes the comment that homeowners are “also expected to continue home owner’s insurance and property tax payment in addition to paying for routine maintenance on the home.” Of course they are. Why wouldn’t they? It’s their home. They hold the title. Your article makes this sound as if it’s some additional burden. Most reverse mortgages offer the borrower the opportunity to set aside funds in escrow to pay the property tax.

    You also say that proprietary loans are more expensive than HECMs. Proprietary jumbo loans are actually less expensive in terms of closing costs, but can have higher interest rates. They do pay out more, so there are trade-offs…like with any loan.

    It is true that RMs will fund for less than the market value of the home, but this allows for some significant benefits. When a borrower opts for a line of credit, they will receive an annual growth rate, sometimes in excess of 6%. This is not interest, and not taxable. It’s simply an increase on their LOC. Also, by borrowing less than their home’s value, the chances of having retained equity when the loan is due is significantly improved. Also, with refinancing, retained equity at loan maturity is even more likely.

    The comment, “the lender almost always wins”, is also rather biased. It is widely understood that for there to be a winner, there must be a loser. However, you will be hard-pressed to find a reverse mortgage borrower who considers themselves as such. This does present a true win-win scenario. If you’d like some examples, ask me or any reverse mortgage borrower or lender.

    I also would like to ask you to avoid using terms like, “never”, as in when one should “never” consider a reverse mortgage. No two people are alike, nor are their circumstances. Let me go on record as saying that reverse mortgages are not for everyone. But they are most definitely for some. You cannot speak in blanket terms for any segment of people, whether based on their age, race, religion or any other factor. There are 62 year olds whose lives can be substantially enhanced by a reverse mortgage.

    Finally, I’d like to close with one thought. Reverse mortgages are not always the best business decision. However, not every senior is looking to make such a decision. When I consult a senior, I ask them what their ultimate goal is. If it does not include the overwhelming desire to remain in their home indefinitely, I will counsel them to consider their other options with greater weight. However, in the event that a reverse mortgage can help them achieve their financial obligations and goals, while keeping them in the homes which house not only their physical beings and possessions, but also their memories and security…I will happily partner with them.

  4. Zook says:

    You are right Corey, you can’t speak in blanket terms, but if bloggers didn’t do that, I would still be reading the first article I ever read on a finance blog because NOTHING is ever covered in full.

    What I think here is that the typical 70-year old married couple, who no longer can perform routine maintenance and that are on tight budgets, before trying to to a reverse mortgage, maybe they should downsize to a reasonable house? Why isn’t THAT the first idea? If you don’t have money saved and need to take out hundreds of thousands of dollars from your house, I think you are in a bigger situation that a reverse mortgage can “fix”.

    If anything, folks with nothing in retirement and only a few hundred thousand in their house, who NEED the funds to live, should be an example of what NOT to do when folks are young and saving. I hope people understand that this is NOT the optimal situation and shouldn’t be something a youngster thinks is a strategy when you get older.

  5. Corey Matelli says:

    Hi Zook.

    Thanks for your response. Yes, in the scenario you use, certainly downsizing is an option. But you’d be surprised how many seniors would prefer to remain in their homes rather than the “better business decision” of selling and moving. This decision can also be more complicated in certain regions, such as the San Francisco Bay Area, where I am. The very same 70 year old couple selling their home and “downsizing” may require them to move out of the area, or even out of state, away from their grandchildren and everything with which they are familiar. Seniors are typically more comfortable with the familiar. My parents are 72 and have a routine. They go to this restaurant on Mondays, this one on Tuesdays and Fridays, etc. They even have their own regular booths and menu selections.

    When seniors have the ability to stay where they are comfortable without having to be burdened with mortgage payments, they really deserve to do so. Often times, simply ridding themselves of that nasty payment is all they need to live comfortable lives. Sometimes, all it takes is an infusion of $500 a month to take the pressure off.

    My point is that it’s not always a numbers game. It’s not always what looks better on paper. People who have worked their entire lifetimes and now face their golden years have the right to live this part of their lives on their terms, and my goal is to empower them to do just that.

  6. Zook says:

    Fair enough Corey. I think we can all learn from this though. I don’t mean to keep beating the drum here, but if you are 22-years old, you have a great chance of living past 90 and you better save for retirement.

    It just seems like such a last option for folks. It’s like SS, pension, 401k isn’t there along with taxable savings or inheritance, so lets tap home equity to live. It’s something that I hope I never have to deal with and I am trying to start now to get a solid foundation for my future. Maybe it still wont be enough, but in my limited purview, the people in need of the reverse mortgage were unprepared and looking for a last resort.

    And being out here on the east coast and having dealt with a few instances of folks doing the reverse mortgage and some going through the steps, I just don’t see that big of a deal going from a half acre, 1100sq foot house in a suburb, to a larger condo with less maintenance in the same suburb. Maybe one day if I live to 70, I will get the reasoning behind it. For now, color me confused. Thanks Corey!

  7. Corey Matelli says:

    Hello again, Zook.

    If you’re speaking as a 22 year old, yes…I hope you find yourself having plenty of wealth so that you don’t need a dime of assistance in order to keep your home or keep up with the cost of living.

    However, this article did not seem to be pointed to the 22 year old 40 years in advance of being old enough for the current standards of a reverse mortgage.

    The fact is, there is a vast portion of today’s seniors who cannot go back to when they were 22 and begin storing money away. They have all they need to live comfortable lives. Money they’ve earned. They shouldn’t have to move and minimize their lifestyles if they don’t want to.

    Thanks for your time, Zook. And I wish you nothing but success in your future!

  8. don smith says:

    So the “kids” get less money to spend when their parents pass-away…who are you protecting?…Your clients or the kids?…in many instances the “State” gets the equity (Medicaid cost) – so your “Advice” actually protected no one other than the state…quote from client “the equity wouldn’t do me any good when I am 6 foot under”…
    my understanding from your article is “it’s better for the senior to suffer for many years, so the kids can spend the equity”…Interesting financial advice?

  9. Jonathan says:

    I think you article missed an important benefit of a Federally Insured Reverse Mortgage,namely the low interest rate.

    The present rate including the annual mortgage insurance costs is 4.75% when you compare this to a no closing cost home equity loan tied to the prime rate, presently at 7.50%, the reverse mortgage compares quite favorably.

    For example someone with a $200,000 balance would save $5,500 in interest with a reverse mortgage, which means that after only 3.5 years they would recoup the higher closing costs and save $5,500 per year after that point.

    Another important factor is the interest accumulation. You are allowed to make monthly payments on a reverse mortgage if you choose to.

    For those who don’t have the money to make monthly payments and choose a home equity line of credit are forced to continue to borrow the additional funds 7.50%. In the long term they may end up owing more than they would on a reverse mortgage.

  10. Jon Ingebrigtson says:

    Regarding Zook’s 1st comment, if they sell a 475,000 home and downsize to a 300,000 condo, wouldn’t they pay about $28,500 in realtor commissions from selling their home? Not to mention moving costs, or the costs of fixing up their home to prepare to sell it.
    That sounds a lot more expensive than a reverse mortgage to me.

    I would also like to congratulate Corey Matelli on being a great voice of reason here.

    It is clear to me that this article is biased, and doesn’t take into consideration that many seniors today are living much longer than they had planned for.

  11. Myself says:

    Corey’s thoughts are a great understanding of the other side of the issue.

    I’ll probably never forget the fact that a nice older man came into a house that I’m current rehabbing. He asked if he could have some of the lumber out of the dumpster so that he could heat his home which was still heated by 2 wood-burning stoves.
    I don’t know his financial situation but I often wonder if he asked because he couldn’t afford to buy firewood, or simply because he chose not to spend the money on firewood because more was available from my rehab.

  12. Corey Matelli says:

    Hello Jon and “Myself”.

    I appreciate your kind words. I have found that opponents of reverse mortgage either don’t know all the facts, or their bias compels them to spread misinformation and half-truths to scare people off.

    You know the saying; don’t let the facts spoil a good story.

    I love teaching people the truth about their options so they can make educated decisions about their financial future. As soon as someone invents a better method for seniors to tap into their equity without having to make a payment while maintaining full ownership of their home…I’ll gladly crusade for it.

    Until then, reverse mortgages will continue to give senior homeowners financial independence and peace of mind.

  13. dan says:

    What all you pro reverse mortgage people fail to mention is that the only reason it is a “good option” is because of poor financial planning. That is why the author says it should be a last resort. Bankruptcy is a “good option” for someone that has a huge number of bills that they can’t pay off, but that doesn’t make it an option that you should want to do. The same is true with reverse mortgages. Just because it may be someone’s only option, doesn’t make it one that anyone should want to do. It enriches the banks at your expense most of the time because they have you between a rock and a hard place. Let’s be honest here now…

  14. Corey Matelli says:

    Hello Dan.

    Wow, your response is straight out of the handbook! First, blame the consumer, then blame the entity designed to help the consumer from their own mess.

    How is the view from your ivory tower, anyway?

    First, let me respond by saying you will not see anywhere that I, or anyone, has said that reverse mortgages are the “only” option. To the contrary, I have said I present them to prospective clients as simply that…an option. When they understand how it works, they will make an educated decision for themselves.

    See, rhetoric works best when someone isn’t able to respond with the truth.

    Moving on…how is it relevant how or why a senior finds themselves considering a reverse mortgage? Should a lifelong smoker be denied medical care, or scolded when they have lung cancer because hey, they brought it on themselves!

    Then you move on to paint the picture of wolf-like lenders salivating at the sight of a financially desperate senior. Here’s a couple keys you either don’t know, or you conveniently left out. Reverse mortgages require no payments as long as the borrower lives in the home. This means that in many cases, the borrower won’t see the first dime of repayment for years or even decades! Equally important is the fact that reverse mortgages are non-recourse loans. This means that even if the loan balance exceeds the value of the home, the borrower or their heirs are only responsible to pay back whatever the home can get in a fair market sale.

    Winner: The Borrower

    Winner: The Lender

    I’ll tell you what, if you would like some real life stories of responsible people, war veterans, teachers, retired executives, mothers who stayed at home to raise their children, retired professional athletes…who have all benefited from reverse mortgages, I’d be more than happy to share them with you.

    The view is much different when you actually leave the tower.

  15. I have never done a reverse mortgage for anybody that was sorry that they did it.

    Also, there are numerous examples in the real world of people who are doing great financially that benefit from a reverse mortgage.

    I’ve had seniors who own multiple properties and have sound finances get a reverse mortgage. One popular reason is that they want to buy another investment property. Now please tell me that that isn’t a good option to get a reverse mortgage.

    How about using a reverse mortgage to buy a life insurance policy that pays off the mortgage when the senior dies?

    C’mon Dan let’s talk.

    Call me directly at
    (425)732-5572 or
    1-800-963-8011 ext 5572.

  16. dan says:


    Glad to talk to you. Getting a Reverse mortgage is a terrible idea for getting another investment property. Taking out a home equity loan would be a much smarter and financially sound move with a lot less fees involved.

    Of course you’re all for them…your peddling them. Are they something to consider as a last resort. Yes. Are they something you should consider at any other time – absolutely not. They aren’t a good use of your money. They are a tool to use when you have not properly taken care of your finances and need to get money out of a non liquid asset.

  17. dan says:


    Wow…my spouting “straight out of a handbook” — nothing like calling the kettle black here.

    Let’s step back and take an objective view here. Which do you think is more objective? A feel only financial planner who has only his clients interests in mind who wrote the piece and a independent person who has been commenting on this blog for over a year (me) who researched them for my parents and found that while, yes, they are an option, are an option you want to avoid if possible. Or a person who peddles reverse mortgages and the only time he has commented was on this one thread. Maybe you can see why I may be unable to see your advice coming as unbiased (and why I think it’s you spouting straight out of the handbook)

    No, you have not said that reverse mortgages are the only option, but you have implied they are a good option. I simply stated that yes, they are a good option as a last resort – just like bankruptcy is a good option as a last resort.

    Now if you’d kindly agree that other options are better and reverse mortgages should be considered when all the other better options can’t work, then I think we can finally agree.

  18. Corey Matelli says:

    Dan, I’m sorry, but I do not agree that other options are “better”. You see, the “better” option is what is right for the individual. I don’t “peddle” reverse mortgages. If anything, I “peddle” accurate information.

    Because I have not responded to your other blog articles does not make my comments any less qualified. Before this thread, I’m sorry to say, I didn’t know you existed. I would dare to assume you could say the same to me.

    If you review my previous posts, you’ll see that in #3 I said reverse mortgages are “not for everyone” and that they not always the “best business decision”.

    In #5, I agree that selling and downsizing is certainly an option.

    In #14, I explain that my goal is to educate prospective clients. If someone decides to get a reverse mortgage, I want it to be their decision. I am not a salesman. If they choose something else, good for them! If they choose a reverse mortgage, good for them!

    To further correct you, I never implied reverse mortgage are a good option. I explicitly said they are a good option.

    If you’re looking for objectivity, you’ve found it in me. I’m as open minded as they come. One of my clients…before she actually became one, was at a fork in the road. She had two options because she could no longer afford to pay her HELOC. She had a part time job, at 72 years old, which was taking a physical toll on her. She either had to move out of state to live with one of her daughters, or a reverse mortgage. I looked her dead in the eye and told her that if she felt like moving was the best thing for her, I would gladly help her pack and load it on a truck. I meant it with all of my heart.

    If you truly have someone’s best interest at heart, you will empower them to make their own decisions, not scare, guilt or shame them into what you think is best for them. And whatever they decide, you will be their friend and supporter unconditionally.

    My track record proves I do just that.

    I wish you well.

  19. Dan,

    The reverse mortgage is simply an option for seniors. I only present facts, and encourage my clients to get their children involved with their decision.

    Thank you again kindly for your valuable time. You had mentioned that reverse mortgages are

  20. Corey Matelli says:


    In the example of the lady I offered to help move…it’s worth noting that she had the full blessing of each of her five adult children, (one of them being an attorney). She was told of reverse mortgage by her financial planner who she trusts completely.

    In a letter she wrote me 6 months after getting her reverse mortgage, she wrote me a letter. In an excerpt from her letter, she said the following:

    “Now I feel like I’m on top of the world. I feel like I can breathe; not having to sell my house (which I’ve lived in for 50 years). I’m so relieved. I bought the car of my dreams.

    Thank you so much, your client & friend.”

    She had options. She chose a reverse mortgage, and she couldn’t be happier.

    Thanks for your time.

  21. Corey,

    You are a wonderful representative of your industry and it is a honor to be one of your peers.

    Like yourself, my company focuses on educating seniors and is a proud member of the NRMLA. I appreciate your approach to help educate others.

  22. dan says:

    Thank you for that wonderful story about how great reverse mortgages are. Now for the other side reverse mortgage nightmare

    Again, Corey, you’re the one spouting the line of your industry. A good choice isn’t a good choice when it’s done due to financial stress. The only reason anyone would even consider a reverse mortgage is because they were having financial problems. You don’t buy a house to give it back.

    This is not my article. This was written by someone who has written several for this blog. His advice is sound.

    I would never get a reverse or would I ever recommend someone getting one. I did the research for my parents and they are a poor financial option (may I remind you, this is a blog about good finances). The key difference between me and you is that I have nothing to gain or lose from this opinion. You, on the other hand, have a vested interest in making reverse mortgages sound good. Can we at least agree on that point?

    Here is a bit from the article:

    It sounded appealing. After all, Farrington had paid off her house years ago and all the equity in that house would come back to her in the form of a $158 monthly check.

    At the time, she had some medical bills. So the extra money sounded great.

    “One-hundred-fifty-eight dollars doesn’t go very far,” she said “It helps pay some of the stuff.”

    But after getting that $158 check for the past seven years, she recently took a look at her mortgage statement and got quite a shock.

    “They now have $40,000 against my home that I owe if I want to take my home back,” she said.

    That’s right, in order to get her house back free and clear, she has to give the mortgage company that wrote up the reverse mortgage $40,000.

    The mortgage company has been giving her a check for $158 for the past seven years which totals around $13,000…

    Now if she had taken out a home equity loan for that $13,000 for 7 years, she wouldn’t have paid $40,000.

    The problem with your numbers is that you assume that a person would take a home equity loan out for the total amount like a reverse mortgage when there is no need to do so and therefore the payments would be much less that the example you gave (since you are only paying interest on the loaned amount at the time)

    The readers here are a smart bunch and they can see who does and doesn’t have a vested interest here.

  23. Corey Matelli says:

    Dan, thanks for posting the article. I think it is worth noting 2 keys. One, it’s dated 13 months ago. I find it interesting you had to go back more than one year to find a negative experience to cite. Two, did you read the entire article? You conveniently left out the second half because it didn’t suit your purpose.

    Dan, I’d like to present to you a hypothetical, but very common scenario. Please tell me what your advice would be:

    A 70 year old widow has lived in her home for 40 years. She wants nothing more than to stay in the home (valued now at $500,000), in which she raised her 3 children. She wants to remain in the neighborhood she has seen grow and evolve for 4 decades…the one which holds so many important memories. Unfortunately, she owes $100,000 on a 2nd mortgage she took out 5 years ago. Her monthly payments are over $700, but with her monthly income, that’s no longer sustainable when you consider her property taxes and over all cost of living. Her ultimate goal is to keep her home, but no longer have a monthly payment, but she doesn’t have that kind of money to pay it off. She can move in with her children, but she is still healthy and active enough to live on her own, and she doesn’t want to be a financial or physical burden on her kids and grandkids. She comes to you for your advice.

    What do you tell her?

    I look forward to your response.

  24. Dan,

    That article that you cited, if you even had cared to read the rest of it, also contains the following:

    “In fact, Masters says taking out a reverse mortgage was one of the best financial decisions he and his wife ever made.”

    I’m so sorry that you are having such a difficult time talking your way out of this one.

    It takes a real man to admit that he is wrong. Are you a real man?

    By the way, How come you never responded to my last post?

    See post #19.

  25. dan says:

    You guys are right.

    I’m just insecure and have nothing to do but argue on the internet.

    Designed to strengthen senior citizens’ personal and financial independence, these loans allow homeowners to convert the equity in their home into cash. Any existing mortgage is paid off and homeowners don’t make any payments to the lender as long as they live in the house.

  27. Zook says:

    Why is an example of mine being extrapolated as if it is evidence? It was an EXAMPLE people. Not to be put to a means test?

    The person downsizing to a condo from a house is going to have to pay a commission and that is why you should do a reverse mortgage? Because of a $28,500 commission? WOW.

    Reverse mortgages are a last resort. If you are 30-years old today, paying off your mortgage, you aren’t telling yourself right now, “I can’t wait to retire and do a reverse mortgage.”

    In general, people with 3000sq foot houses and three kids do NOT need the space when they are 70-years old.

    Sales pitches suck. There are plenty of negatives regarding reverse mortgages. Think of all the people that DO NOT need one, but are sold this idea? That alone makes my blood boil.


  28. Zook,

    Why do you think the reverse mortgage is a last resort? I haven’t been convinced. Please elaborate. I’ve only heard opinions for you and Dan. Please explain why you believe it’s a last resort. Please actually respond to my questions, less people see your eyes turning brown.

    Are you saying that most people have 3000 sq foot houses?

    Are you saying that paying a $28,500 commission is cheaper than a reverse mortgage?

    Did you know that most seniors want to stay in their homes?

    What turns you off specifically about a reverse mortgage?

    You mention that there are plenty of negatives regarding reverse mortgages. Give some examples, please.

    Please tell me which of the following should be the last resort:

    1. (Zook

  29. Zook says:


    The stress of moving? Paying a sales commission? This is the big argument for a senior doing a reverse mortgage? Moving costs? THAT is the big finale to shoot down the idea that reverse mortgages are a last resort?

    How about pissing through the big lump sum without the proper planning? How about needing assistance in the future and having to show the pot of gold you have FIRST? I mean this discussion, a good one at that, could go on for days.

    There is another side to reverse mortgages. It’s a case, by case scenario, but in general terms, if you have taken the correct steps in your life to plan for retirement, you have a big chunk of change in your IRA’s, pension and 401k plans. You have ALREADY downsized your house before you are even eligiable for a reverse mortgage, you don’t need a reverse mortgage. Are there examples out there where folks need it? Yeah, but those people are stuck taking equity of of their home because they don’t have other funding.

    The loan will need to be repaid if the borrower moves in with family, which is a possibility. You will also lose homestead protection [depending on the state] if in time the borrower needs to move into a nursing home. The equity withdrawn from the house would first be used to pay down nursing home costs and miscellaneous health care costs. Think of that big pot of gold as being protected if things were done right and in your home and NOT protected if it sits in an ING savings account.

    The information provided in ALL of these health care examples, including mine, don’t take into account even half of the needed info to make rational decisions.

    However, we should all take a reverse mortgage salesman spouting how fantastic they are, with a grain of salt.

    I can tell you. I am in my late 20’s. A reverse mortgage status when I am 62 isn’t something I am trying to attain. It’s not in my plans unless something drastic happens.

  30. Zook,

    You still haven’t answered my questions.

    Most seniors opt for the credit line option. I NEVER advise seniors to take out a lump sum and put it in an ING account. That would be completely ridiculous!

    I ALWAYS advise clients to keep the money in their equity until they need it. While the money remains in the equity, no interest is charged for that money, and their credit line achieves growth.

    Also, many seniors use the reverse mortgage to buy long-term care insurance. Others might use a reverse mortgage to purchase a life insurance policy that pays off the loan when they pass on.

    Really, tell us what does a reverse mortgage do that is so horrific that you consider it a last resort?

    So far all that I’ve heard from you is poor rational and a lack of knowledge on the subject.

    It’s true that not every senior needs a reverse mortgage, just like not all people need a pick-up truck. Would you say pick-up trucks are bad because you would never need one?

    Right now that is what your rational seems to be.

  31. Zook says:

    Its a great question…If reverse mortgages are a pick-up truck and everyone doesn’t need a pick-up truck, than you are helping the idea that reverse mortgages are for a select few. Heck even people WITH pick-up trucks don’t need them.

    It’s a last resort and for a select few. I never said they should never be used. I think I have made that clear every time I have posted. And for the 4th time, any 20-something coming to financial forums like this, won’t need a reverse mortgage if they plan now. Having to pay $10-$15K to get equity out of your house to live or buy long-term care isn’t a goal or something to try to get. IT IS A LAST RESORT, can you not admit that?

    Should I be sitting back telling myself to pay off my mortgage so when I am 62 I can pull all out all of the equity in your home to live?

    It is yet another way for salesmen to make money on the elderly, simple as that. It is a good sales pitch to tell that elderly person how great of an idea it is that they didn’t plan throughout their working career and how “tough” it will be to sell that house they have lived in for 35-years and how the reverse mortgage will help them avoid paying a sales commission and how “nervous and scared” they might be when they sell their house. Fear is a wonderful tool. It’s a decent pitch for the weak minded who get suckered into crap annuities and other insurance products every day, but here? With knowledgeable people to debate back and forth on a financial blog devoted to folks in the know? And you don’t think their are holes in your argument?

    I won’t get in a internet ‘who knows more’ because it is irrelevant. Great you know more, but when an article comes out and to see everyone get up in arms about it, shows just how far reverse mortgages are being pushed.

    When something so great it can’t be bad comes along, question the crap out of it and see what happens.

  32. I am amazed by your ability to form opinions from thin air.

    The fact that people like you approach the internet as a place to misinform others is disgusting. You should be ashamed of yourself with your name calling and foul language. No wonder you must hide behind the “Zook” moniker.

  33. Zook says:

    lol…When in doubt, just attack.

    WEAK my man, really weak.

  34. Myself says:

    “Thank you for that wonderful story about how great reverse mortgages are. Now for the other side reverse mortgage nightmare.”

    This statement was from Dan in post #22.
    So, what you’re saying is that every single person would have the exact same circumstances which caused them to get a reverse mortgage?
    Let me ask you this. Do you think that anyone who gets an Option ARM is an idiot?
    If so, you will find people who didn’t plan properly for them and only paid the absolute minimum payment, while there will be others who not only paid more than required, but they paid for the mortgage in full BEFORE the rate adjusted.


    This one is from Zook:
    “It is a good sales pitch to tell that elderly person how great of an idea it is that they didn

  35. Zook says:

    What about the people that DO plan and don’t need them? I can’t even get an inch with you or anyone else. There are MILLIONS of older folks who are eligible who don’t need reverse mortgages. They aren’t for everybody. Can we agree on that simple sentence?

    It’s a last resort for folks who didn’t save and don’t have their finances in order. I think I will say it again for effect. Reverse mortgages are probably life savers for SOME, but in general, getting one means you screwed up pretty good along the way.

    And what do I say to someone who bought a house in 1955 for $10,000 in Los Angeles and now are selling their 3-bedroom, 1-bath for $750,000?

    TO get back to the article, Corey mentioned in #7 that this article sang the wrong tune to the wrong crowd. I can agree with that. The blogosphere, I would like to think, is over-run with 20-40 year old’s with solid understanding and knowledge. The articles I run across discuss saving, opening a Roth and preparing to not have Social Security. The headlines rarely mention reverse mortgages as it’s not something to strive for.

  36. Corey Matelli says:

    Ahh, the debate that wouldn’t die!

    Hi Zook. For the record, my very first comment to the original article, (#3), says exactly what you said no one would admit. That reverse mortgages are “not for everyone”.

    That being said, that does not mean it is necessarily a “last resort”, either. In post #23, I had offered Dan a scenario and asked him to tell me how he would advise that person. So far, I’ve heard nothing but crickets. If you’d like to take a stab at it, I’d love to hear your advice.

    To reiterate, (which I seem to need to do frequently here), I do not see the relevance in labeling borrowers as poor planners or anything of the sort. What difference does it make what path they took to get to where they are? It would be perfectly reasonable for that to be important if they could go back and do it over again, but they can’t. The fact is, they are where they are now, and they face certain options.

    It is popular in our culture to attach labels to people. “Oh, they act that way because they’re Irish”. “They like that kind of food because they’re African American”. “They’re not fun to be around because they’re Virgos”. I mean, c’mon…does it really matter? Get past the woulda-shoulda-couldas, and get in the moment.

    Perhaps today’s 20, 30 and 40 somethings will plan so well that reverse mortgages will be obsolete in 20-40 years. Time will tell. But one thing is certain now. They exist, and millions have benefited from them, and millions more will.

  37. The reverse mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years.

    While some have needed the cash from a reverse mortgage much more than others, the growing popularity of this program is evidence of its benefit in a wide range of financial circumstances.

    As she had already mentioned, Zook is only giving her own opinion. Zook also holds the opinion that nobody would ever have use for a pick-up truck.

    It is grossly evident that just like some many people in his generation, Zook can only relate to herself.

  38. Hi Jon.

    I understand your frustration, but there is no point in getting personal. Most people tend to view life through their own perspective. I certainly am guilty of that.

    On a different note, you do raise an interesting point on reverse mortgage being used by people for reasons other than bailing themselves out of financial high water. Here is an interesting article I read a couple months ago which is worth the time:

  39. Zook says:

    Its funny Jon…You complain I called you a name [which I never did, nor will now]…Then YOU continue with the insults. Carry on I guess…

    You are right though. Everyone who owns a pick-up truck NEEDS it like the air they breathe. They NEED that pick-up truck for the yearly trip to the Home Depot to get a few potted plants. Pick-up trucks are convenient, but aren’t NEEDED for many, many folks, yet they get sold them. Of course everyone needs to be high off the ground, everyone of course needs 4WD and 13-MPG.

    Moving on….

    People are being sold reverse mortgages that don’t need them, by folks that are savvy. These salesman now have another product to put in their arsenal to sell. And the financial markets and the elderly need another high cost, gimmicky product forced down their neck?

    As far as the example you have in #23, the question asked has been phrased so the answer is “You need a reverse mortgage”. She has lived in a house for 40-years is 70-years old and recently took out $100K for what exactly? She doesn’t want to be a burden on her children, well who is taken care of the maintenance on a 40-year old home? It implies that at 70-years old withOUT money to pay for taxes and a $700/month note, that she should be in a house worth $500K to begin with. And that she could take care of the property, which I assume she can’t. There are over 55 complexes, there are condos with maintenance fees that shovel the snow and take care of the roof etc. etc. etc. What happens when she is 80-years old? Should she still be in the house she couldn’t maintain at 70? Will she be able to use the second floor? LOL. I mean say she pissed through the money? Then what? Someone who is in dire straits is all of a sudden going to get financial savvy with a reverse mortgage?

    Maybe for this person in #23, a reverse mortgage is the answer. Do I trust someone selling reverse mortgages to give her the full story with other solutions? NOPE.

    My question to you Corey. What does this woman do when she collects the “pot of gold”? Does she hire you for a fee to put the money to work or do you drop her/recommend her to someone?

    The problem lies when the first step is OVER. Then what? Do you collect your fee and bounce?

  40. Hi Zook.

    It seems you have read much between the lines which was not there. That being said, those are legitimate questions. Let me go through your post point-by-point.

    People are being sold reverse mortgages that don’t need them. I suppose that’s true somewhere, but that’s why it’s important to find a reverse mortgage specialist who as a track record of putting the client’s needs ahead of their own. Believe it or not, there are more in that category than those who are not. You assumed a few things about their physical condition and their ability to maintain their home. In my experience in working with seniors, they know their limitations. They do not want to stay in a home they cannot maintain either physically or financially. I actually talked one would-be client out of getting a reverse mortgage because he had a 3 level home which was too big for him. His doctor even advised him to sell it and move. But, as I stated in my scenario, this person is able to still live independently. Maybe you missed that part.

    You also use some graphic terms when questioning their ability to manage their “pot of gold”. Going back to your previous posts and my responses to them, you are eager to presume and label reverse mortgage borrowers as financially irresponsible and ignorant. I really would encourage you to avoid blanket stereotypes without even getting a chance to know the people.

    You are also eager to point out that they can move into condos and the like. Yes, this is true. But you forgot the fact that they wish to remain in their home. This is not something to be ignored. People have the right to their wishes, as long as they are able. Your question about what they will be like at 80 is not their biggest concern because the chances they will live that long are slimmer than a 20 year old seeing his 30th birthday. That doesn’t mean this issue is ignored, but it does mean that if they want to stay in their home for the indefinite future, they have that right.

    I am not a financial planner. So the answer to your final questions are “no”, and most definitely “no”. It seems you have some serious trust issues with not only reverse mortgages, but the people who offer them. Your cynical questions about “collecting and bouncing” and “dropping” these people is actually offensive. I would like to believe you do not intend to be insulting, but your cynicism is causing you to be very prejudiced.

    I have worked with the adult children of clients who have had concerns about their parents’ ability to manage their newfound wealth. In some cases, my clients have added one of their astute adult children to their bank accounts for accountability. This is very wise. I also have relationships with qualified financial planners who are available to assist anyone in need.

    I really do not want to continue going around and around on this. I do, however, want to encourage you, Zook, to be willing to accept that there are moral, ethical and qualified reverse mortgage professionals out there who genuinely have the best interests of seniors at heart. Many spend time volunteering in senior centers, retirement communities and such. Many have become Certified Senior Advisors, (CSA), and basically are dedicated to enhancing the lives of seniors.

    Please be careful not to paint everyone with the same brush, and please be open to the fact that there are actually good people out there serving this precious segment of our society.

  41. Hellllllllloooooooo Zoooooooooooook?? Are you still out there?

    Just checking.

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