Reverse in Real Life – when does a reverse mortgage make sense?

Carol: 62 years old  •  $100k mortgage  •  $600k home value
Carol is retired and recently widowed which has reduced her income while her bills have remained the same. She only owed about $100k on her mortgage and had plenty of equity in her $600k home.

She decided to reach out to her mortgage broker to look into doing a refinance. A traditional refinance could help reduce her mortgage payment, but with the direction the economy has been headed in, she wanted a bit more financial security.

A traditional refinance wouldn’t do enough to help since her rate was already under 4%. A cash out refinance would only increase her monthly payment while giving her money she doesn’t need right now. Her mortgage banker looked into a HELOC, but that is a temporary solution that would force her to spend more on her monthly liabilities, while having the risk of payments increasing down the road.

Thankfully, her mortgage broker knew about reverse mortgages, and he suggested she refinance to a reverse mortgage for peace of mind and additional security. The reverse mortgage paid off her mortgage balance and set her up with an open line of credit. The reverse mortgage also gave her the security of eliminating her required monthly mortgage payment, thus reducing her monthly bills.

Carol greatly benefited from this fantastic financial tool because not only did it make her mortgage payments optional* (giving her the freedom and flexibility to make payment if she so chooses), but it also provided her with an open line of credit that she can access at any time, AND of which the unused credit grows** at the same rate as her reverse mortgage interest rate. This means more security now and down the road. 
SummaryCarol used the reverse mortgage to:Pay off her existing mortgageMake her monthly mortgage payments optional*Create an open line of credit for future expenses
If Carol’s situation sounds similar to a client of yours, let’s get in touch. A reverse could be the solution they’ve been looking for.
*Borrowers must pay property taxes, insurance, any HOA fees and maintain the property.
**Growth factor is not available on all reverse mortgage line of credits.