Often thought of as only a one-way payment street, with reverse mortgage remunerations flowing from a financial institution to the senior customer, there are some recipients who actually prefer to make repayments to the lender; sort of a reverse/reverse.
“I have started to get requests from borrowers to look at the option of making payments on reverse mortgages,” reports Angella Conrard, reverse mortgage advisor, National Aging in Place Council, Orange County, Calif., and founder, National Care Planning Council. South OC.
Conrard tells of “one client who just got a reverse mortgage – it was a fixed rate. He needed the money now for various reasons (repairs from hurricane Katrina, grandchild’s education, and new car), however he worked himself out a payment plan to pay it back for 15 years.” Yet, another client, “in her early 60s who is looking to improve her financial freedom by doing the reverse mortgage, just wants some temporary relief for couple of years (she is still working), until her retirement income increases,” according to Conrard. “At that time, she plans to make some payments towards the reverse mortgage, so she can retain more equity.”
Nikolay Ratajczak, Advent Financial, Inc., says of the reverse/reverse, “Borrowers feel good about the ability to later repay or lower the balance at any point in the future. This sentiment may be increasingly important if passing along equity as an inheritance is of concern to the borrower.” Ratajczak points out, however, that “it may later prove difficult to pay down the reverse mortgage because of other priorities or limited cash flow.”
He believes more interest will develop in the repayment concept with the advent and acceptance of the HECM Saver, “if it is utilized for short-term needs, or as a withdrawal and repayment type of account.”
Conrard offers the suggestion to lenders that they set up specific programs or statements that would show various payment options a consumer can use if they choose to make payments on their reverse mortgage.
Written by Neil Morse