There’s a misconception out there that a person can only be eligible for a reverse mortgage once in their lifetime. However, this isn’t necessarily true. Depending on your situation, you may have the need for a second reverse mortgage. According to Larry Waters, a senior reverse mortgage consultant at Resolute Bank in Maumee, Ohio, “People need to know that a reverse mortgage isn’t necessarily a one and done deal. A lot of times they think it’s the last thing that they’ll do, but sometimes things change and they want to move. It can work for five or 10 years and then could possibly help them again to downsize or move to another location”, says Waters.
Let’s take a look at how this might work. A recent article gives a great example of how a woman, who we’ll call “Susan”, benefited from obtaining three reverse mortgages over the course of five years. Susan got her first reverse mortgage approximately nine years ago when she lived in Spokane, WA. Susan’s children had moved away, and after the death of her husband she was living alone. Her home was now too big and she was looking to downsize. However, the home was in need of some upgrades before it could be sold. Susan initially tried to get a regular mortgage, but was denied because she didn’t have the income she had when her husband was still alive. Susan decided to get a reverse mortgage. She took a portion of the funds upfront with the rest in a line of credit. She used the funds to make renovations and was able to turn around and sell her home for top dollar. She made enough money from the sale to pay off the reverse mortgage loan and purchase a smaller home with cash.
After purchasing a smaller home, Susan got a second reverse mortgage to free up some cash for emergencies. Since she didn’t need an income stream, she chose to receive the funds in a line of credit.
A couple years later Susan opted to purchase a new home downtown built specifically to accommodate seniors. This time she decided to take advantage of the Home Equity Conversion Mortgage (HECM) for Purchase program. This type of reverse mortgage allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Once again, Susan was able to use the remaining funds from the sale of her home to pay off her second reverse mortgage.
While a reverse mortgage worked for Susan, this type of loan isn’t necessarily the right fit for every situation. For example, it’s important to be aware of the costs involved in obtaining a reverse mortgage and ensure that the costs don’t outweigh the benefits.
If you’d like to learn more about reverse mortgages, please use our Reverse Mortgage Calculator or call 800-218-1415.
1 Third Time’s a Charm: One Loan Officer’s Unique Client Experience – reversemortgagedaily.com, by Alana Stramowski, 6/5/16, http://reversemortgagedaily.com/2016/06/05/third-times-a-charm-one-loan-officers-unique-client-experience/.
Author: Meredith Manz