A Reverse Mortgage Success Story

The obstacle is the path. ~ Zen Proverb

I want to share with you a reverse mortgage success story involving clients in their mid 70’s. The wife is currently still working but wants to retire.

Their house is paid for and has been for several years. The home has served them well but is starting to show signs of age and requires repairs.  

They looked at several options about paying for the renovations and noted that their small savings had been dwindling quickly, and like most Americans today, they had failed to save enough money.

Retirement in today’s world is nearly twice as long as it was 20 years ago due to advancements in medical care. That’s great news, but it does tend to strain one’s finances.

The clients decided against a home equity line of credit for several reasons. First of all, the increased burden of additional monthly payments. Secondly, the uncertainty of having additional funds available in the future should they need it.

After all of their investigation, they decided that a reverse mortgage with a growing line of credit, would be the perfect answer for them. It enabled them to borrow only as much as they needed, preserving proceeds for them in the future. Additionally, the reverse mortgage line of credit comes with a guaranteed growth rate, something most people know nothing about.

Here Is How It Works

When the loan is closed the unused portion of the available principal limit is set aside in a line of credit. It also has a guaranteed growth rate added to it. In this case, my client had a $120,000 line of credit that was available to them once they had established the reverse mortgage. The line of credit grows at a guaranteed growth rate, in this case, 4.68%, so that in 10 years they would have available to them $193,000.

Unlike a traditional HELOC, the lender can never close the reverse mortgage line of credit, and the borrower can access it anytime they wish with a simple phone call. (Provided their taxes and insurance are kept current and the home is properly maintained) This provided the clients with all the flexibility they needed, and the additional safety net that they can tap into without having to reapply, get a new appraisal, or any additional qualification. Also, the guaranteed growth rate is written into the loan documents and stays in place regardless of the home’s value.