NECN Airs TV Interview on Benefits of Reverse Mortgages

New England Cable News (NECN) devoted a recent segment to explaining reverse mortgages and who can benefit from them.

There are several situations where seniors can benefit from taking out a reverse loan, including people who have a hard time making ends meet on a day-to-day basis, or people who want to defer collecting social security payments until age 70, and want some money for the interim until they reach the point of getting a higher payment, says Peter Bell, president of the National Reverse Mortgage Lenders Association, in the segment.

Or, he continued, it could be people that have other assets, such as stocks or bonds that they want to hold on to for a while longer, or seniors who want to ultimately sell their home, but are holding out because of the down market.

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Bell also explains how the loan amount is established, and the options for receiving those funds, going on to mention the HECM Saver, which cuts down on upfront fees.

While every senior has the option of the Saver, he says, it really depends on what the senior’s utilization of the money is: how long they expect to have the loan out, whether they need all the money right away, and whether they need a larger or smaller amount of money.

Written by Alyssa Gerace

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  • Even though the interviewer was very nice and her demeanor was superb, her opening was miserable in stating that reverse mortgages are a tool which can help seniors “out of bankruptcy and keep them in their homes.”  Talking about the loan of last resort and
    having bad information on when a senior qualifies for a HECM, the interviewer right off the bat demonstrated she was not a serious student of the product.

    As usual Mr. Peter Bell did a great job of presenting the program in a short segment.

    There is a prevailing theme which is, however, somewhat
    troubling.  Starting with the idea that seniors might have some stocks and bonds recover is not a recommended reason to leverage another asset and incur debt whose combined ongoing cost of financing can exceed the net investment return on those same stocks and bonds.

    But perhaps even worse was the de facto recommendation that seniors defer their Social Security benefits through a reverse mortgage.  There are many strategies and utilizing debt at inception is very questionable.  This is no different (and from a risk standpoint worse) than buying a deferred annuity with the proceeds of a reverse mortgage.  There are other options which most financial planners consider to be as good if not much better even from a pure numbers
    presentation.

  • I cringe everytime I hear someone explaining this product- fully expecting some type of “nervous” overstatement or exaggeration but Peter calmly answered what she had asked him.  He’s got his elevator speech down pat.  BTW, the waiting until 70 to take social security is a fantastic idea that doesn’t get enough attention.

    • It is a lousy idea if a senior dies at 69 with no spouse.

      Using a reverse mortgage when one can make the payback election at 66 or 70 is a terrible idea.  Why incur interest and MIP?

      The first question retirees should ask is how many years until the total payout of waiting will take?  One needs to factor in accrued interest and MIP as well.

      Delay based on a accruing debt is illogical and a very poor suggestion in the vast majority of cases.  Please make your case.

      • wealthone,

        Please see my comments to dduck12 below.  Our expertise is reverse mortgages not investments or Social Security payout options.

  • Critic, believe it or not, some people want to delay the SS starting date, that never even heard of an RM.  Forced, or ill timed sale of anything including stocks, bonds or the home is a decision that might include an RM option.  Financial planning might include delaying the start of, or picking the type of pension payout form and/or the initiation of an IMMEDIATE annuity, and could be a source of the emergency fund instead of liquidating  asset that the senior would rather hold onto for a while.  But, I do agree, that it probably is ill advised to do a DEFERRED annuity, but I still maintain that LTCI is a wise decision if the senior “can’t find the premiums” any other way.

    • dduck12,

      You are right that many do consider pushing back the initial date of taking out Social Security.  Is that good or bad?  It could be an absolute waste for someone who is single and is unlikely to survive to 66 or 70.  While Social Security is all or nothing for single individuals, there are many features on deferred annuities that make them much more appealing today than years ago.  While Social Security with the loss of the the payback rule late last year has worsened, deferred annuities have generally improved over the years.  

      There are many reasons to delay and not delay the taking of Social Security.  For example, delaying until age 70 could mean that the raw “catch up provision” of foregone benefits could be delayed until age 78 or beyond based on the economic cost of deferring those payments such as lost income or the costs associated with using a reverse mortgage to make up for the loss of those benefits.

      LTCi is a new topic.  It is presented in another article.  Perhaps you could make your biased or unbiased comments there.

  • Critic, if you are not a believer in LTCI, nothing I can say will change your mind.  But for those that do desire it, sometimes it’s hard to find the premium bucks.
    You pays your money, you makes your choice. 
    Have a great day

    • I strongly believe in LTCi but also believe it has its weaknesses. 

      The unfortunate thing is that the more affluent generally fail to properly evaluate it as part of their overall financial strategy until it is too late or at least that is my impression.

      I have generally a problem with advising anyone to go into substantial debt for it, especially if their only major asset is their home.  Perhaps you do not.  We each have our own bias and opinions.

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