CNBC: Reverse Mortgages Provide “Lifeline” During Crisis

Reverse mortgage applications are up during a time when many senior homeowners are looking for “lifeline” to help lessen sequence of returns risk, writes CNBC in an article published Monday. Further, some advisors are taking a second look at this option for their clients.

“With coronavirus shutdowns wreaking havoc on the global economy, investment portfolios are also getting battered…” CNBC writes in the article, titled “Seniors turn to reverse mortgages as a cash lifeline during the coronavirus crisis.” “While that’s unpleasant for most investors, it’s especially devastating for retirees who count on their investments for income.”

The article cites March application data from Reverse Market Insight showing an uptick of 15% in applications during the month and 50% year-over-year in the first quarter.


It also includes input from one financial advisor who recently began reconsidering reverse mortgages as a tool for his clients, after ruling them out in the past.

With a recap of reverse mortgage basics, the article points to the of reverse mortgages as a tool to be used against drawing down on investments during a down market, rather than a means to draw down on home equity quickly for a one-time purpose.

“Perhaps the biggest hurdle for reverse mortgages is borrowers themselves,” CNBC writes, citing financial advisor Rick Kahler, president of Kahler Financial Group.

“My clients say to me, ‘I’ve spent my whole life paying off my mortgage and now you’re telling me you want me to put a mortgage on my property?’ he said.

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  • Glad to see this article come out. Very true, now is an ideal time for many senior Homeowners to consider a reverse mortgage. Not only will the equity in ones Home serve as a future cushion for the unknown, but it could also be used to increase the amount of cash flow coming in on a monthly basis for seniors!

    Also, as the article points out, the proceeds from a reverse mortgage can be used as a hedge in a downturn market as we face today. Instead of cashing in investments when market values are so low, the proceeds of a reverse mortgage can stay off the heavy losses some seniors could face!

    The article states that, “Perhaps the biggest hurdle for reverse mortgages are the borrowers themselves.

    Many financial advisors are saying, “My clients say to me, “I’ve spent my whole life paying off my mortgage and now you’re telling me you want me to put a mortgage on my property!

    That is true, but does the equity sitting their in a seniors Home doing them any good today? It may, especially if their aim in life is to leave a free and clear Home to their children upon death. However, if that is not the case, why not a reverse mortgage? Sure, many seniors have spent their lives paying off their mortgages, one main reason would be not to have a mortgage payment as a financial burden any more. Great, with a reverse mortgage, they do not have to worry about that burden, no more monthly mortgage payments!

    Another thing to think about is if the aim of the senior is to leave their home to their children, maybe giving them the cash today from a reverse mortgage will be much more of a value to them today?

    There is more of a need today for a loan originator to be fully educated on their product. Educated and knowledgeable enough to help and aid our senior Homeowners to fully understand the benefits they can reap from their hard work in paying off their mortgage!

    It is also true, a reverse mortgage is not for every senior, but more and more, especially in today’s environment, we find more seniors are finding that a reverse mortgage is for them!

    Good article, good tips, I hope I helped with some more!

    John A. Smaldone

  • Investment portfolios are rarely a source of income. For example, an investor sells his stock at a historical cost basis loss. Where is the income? We don’t numbers to realize this fact but, just, in case, an investor bought a block of ABC common stock two years ago for $30,000 (an all time peak) and sells it for $28,000. No income was ever earned. In fact, the investor lost $2,000 just in the difference in the acquisition cost and the net sales price. The investor also lost any earnings on the $30,000 during that 24 month period; yet the sale put $28,000 in cash into the hands of the investor.

    What is that $28,000? We call it a partial return of capital AND cash inflow. The most important aspect of an investment portfolio is not its ability to provide gains or income BUT its ability to provide cash inflow as needed.

    A very bright and caring securities salesperson came to the home of my clients and tried to convince him that his bond was better than a product his competitor had offered my client. The salesperson explained that his product yielded a 3% higher yield per annum than the other product; however, one major difference was that the product that earned more had a higher minimum hold period than the other product. My client whose a very astute 84 year old who had a net worth of several million dollars, said: “Sonny, at my age, I don’t even buy green bananas.”

    While some colleges are offering credentials for retirement income specialist, in retirement, income is NOT king but as at most stages in life, cash IS king. Income considerations are important but nowhere as important as cash flow. For example, some people always find ways to outspend their income. Cash flow does not just look at income and expenses but rather all sources of cash and all expenditures of cash. It is fair more comprehensive and, for most consumers, more vital than even getting the highest secured return on their money. While one can survive in this economy with no income, one cannot survive without cash flow.

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