Reverse in Real Life
when does a reverse mortgage make sense?
John: 65 years old  •  $0 mortgage  •  $400k home value
John owns a condo and has little-to-no liquid assets. He is currently only receiving Social Security Income and is living paycheck to paycheck. Although he doesn’t have an immediate need for cash, he’s concerned about unexpected expenses that may come up in the future. John wants to be proactive and come up with a source to handle any such expenses. He read that reverse mortgages can be used on condominiums and that a HECM Line of Credit will allow any unused money in the LOC to grow over time, opening additional equity in the home.
After reaching out to a reverse mortgage lender, John found out his condominium was in fact approved by HUD, because his lender checked it on the HUD Condo lookup. He was fit with a HECM product that allowed him to access his home’s equity, without having to take a out a large lump sum or even schedule monthly disbursements. The reverse mortgage was tailored to meet John’s wants: to have a growing line of credit available for unexpected expenses. He now rests easier knowing he can handle anything life throws his way.

The graph above is based on John’s scenario of a 65 year old client with no mortgage balance and a home value of $400,000. See the margin, expected rate, and interest for this scenario here.

Smartfi Note:  Although John’s condo was approved by HUD for a HECM, if John’s condo was not approved or was inactive, John could have explored alternative proprietary reverse mortgages products to meet his needs.