By George A. Downey

Motion-picture and television actor Tom Selleck became the face of reverse mortgages through TV advertising. Unfortunately, his message to “explore the potential” has been confused as a recommendation that older homeowners should get a reverse mortgage. This may not always be the case.
Obviously, the time restrictions of TV commercials limit content. To his credit, though, he created national awareness of a lesser known and frequently misunderstood resource that has the potential to increase and extend financial security – a hugely common fear among aging Americans.
Why it matters
Home equity, the largest asset of most, is seldomly recognized as a financial planning tool, as it is illiquid. However, it is possible. A reverse mortgage offers a solution for eligible homeowners who don’t want to sell or take on the burden of debt payments.
Unlocking home equity to provide additional cash and/or a credit line can increase planning options and extend financial security.
Home values and interest rates generally spiked to record levels after the pandemic. Both can be key factors in reverse mortgage benefit calculations. The federally insured Home Equity Conversion Mortgage (HECM) reverse mortgage terms are based on current values at origination and will not change if or when financial or real estate markets decline. This built-in stability can make it an excellent resource for financial and retirement planning.
Reverse mortgage – A unique solution with additional benefits
The federally insured HECM reverse mortgage enables eligible homeowners 62 and older the ability to convert a portion of home equity to cash and/or credit to improve cash flow and liquidity. HECM terms are designed for retirement budgets, including paying off current mortgages and liens without the obligation to make future monthly mortgage payments.
HECM terms and benefits are guaranteed by federal insurance and will not be changed or reduced by any future economic, financial market, or real estate value declines.
Education is key! Learn everything: the pros, cons, and how they work; the truth about misconceptions; and your eligibility, and most importantly, suitability.
Reverse mortgage overview

  • No monthly mortgage payment obligations – voluntary payments are permitted but not required.
  • Credit line growth – the undrawn balance of the credit line grows (compounds monthly) at the same rate charged on funds borrowed, providing more funds for future needs.
  • No maturity date – repayment not required until no borrower resides in the property.
  • Non-recourse loan – no personal liability for borrowers or heirs.
  • Repayment of loan balance may never exceed the property value at the time of repayment. 100% of surplus goes to owners or heirs. Any deficiency is paid by the Federal Housing Administration (FHA) insurance.
  • Unlike home equity lines of credit (HELOCs), funds and loan terms are guaranteed. They cannot be frozen or canceled if the loan is in good standing.
  • Borrower obligations (to keep loan in good standing) are limited to:
  • Keeping real estate taxes, homeowners’ insurance, and property charges current
  • Providing basic home maintenance
  • Continuing occupancy as primary residence
    Who should consider a reverse mortgage?
    Every aging homeowner and their financial advisors should know if and how housing wealth (home equity) can be utilized to improve planning success.
    Individual analysis is essential. Beyond financial considerations, personal circumstances and family dynamics are integral to determining suitability.
    Consultation with a Certified Reverse Mortgage Professional (CRMP) is recommended to learn if a reverse may be appropriate. If so, know why. If not, why not?

Eligibility requirements apply. HECM counseling is required. Subject to credit and income approval. You must occupy the residence as your primary home. You must continue to pay for property taxes, insurance payments, homeowners’ association fee, home maintenance costs, and other fees as required. You must have significant cash available for the down payment. The balance of the loan grows over time and interest is charged on the balance. The loan becomes payable when the last borrower on eligible non-borrowing spouse passes away, sells the home, permanently moves out, defaults on taxes, insurance, or maintenance, or otherwise does not comply with the loan terms.

About the Author: George Downey, CRMP (NMLS ID 10239) is the Regional Senior Vice President of The Federal Savings Bank branch located at 100 Grandview Road, Suite 105, Braintree, MA 02184. Contact Mr. Downey at 781-843-5553 / Cell 617-594-3666 / gdowney@thefederalsavingsbank.com, www.thefederalsavingsbank.com/georgedowney