REVERSE MORTGAGE INFORMATION: Tools, News and Resources to Help Seniors Decide

We came across a truly useful book the other day: Scam Proof Your Life (377 Smart Ways to Protect You & your Family From Ripoffs, Bogus Deals & Other Consumer Headaches). The book is written by Sid Kirchheimer, “AARP’S Scam Alert Expert” and contains a wealth of practical tips and advice to use in protecting against all types of financial mischief from high-tech identity theft to avoiding used car sales scams.

Our initial interest in picking up the book was to see the advice offered for avoiding reverse mortgage scams. Given the authors AARP connection (even highlighted on the cover) we surely thought a chapter (at least a few pages) would be devoted to dangers in the fast-growing reverse mortgage sector. On this point we were disappointed. Not a word about reverse mortgages or reverse mortgage scams.

A chapter is devoted to “Homes”, but it deals mostly with home purchase mortgages and home improvements. Quite surprising that a book about consumer scams carrying the AARP logo on its cover does not mention reverse mortgages.

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A new study from the sheds light on the prospects for baby boomers to use their home equity to finance retirement.

It’s long been noted that home equity is one bright spot in an otherwise bleak retirement financial picture. By virtually all accounts, home equity is the single largest wealth holding for retirees and near-retirees who haven’t set aside enough of other savings. According to the Michigan study, one-third to one-half of the average “early baby boomers” (EBB) wealth is in the form of home equity.

Not surprisingly, many have suggested that home equity is the key to financing America’s retirement needs in the face of growing longevity and diminished government resources.

The Michigan study included the following survey question:

“On a scale from 0 to 100, where 0 equals absolutely no chance and 100 equals absolutely certain, what are the chances that you will sell your house to finance your (and your husband/wife/partner)’s retirement?”

At first blush, the survey results don’t appear encouraging for those looking to home equity to bail Americans out of a jam. This may be further reflection of the apparent overconfidence felt by Americans when it comes to their retirement prospects:

“…60% of homeowners stated they did not plan to sell their homes to finance retirement, and close to 70% of respondents felt there was a minimal (10% or less) chance they would sell their homes to pay for retirement. In other words, most older Americans report they will not sell their homes to finance retirement, even though this store of wealth is accessible for consumption purposes.”

On the other hand, phrasing of the survey question did not allow for other “middle road” options. For example, it shouldn’t be concluded that older Americans would be similarly opposed to accessing retirement resources by borrowing against their home equity. Indeed, reverse mortgages may fit very nicely with older American’s apparent strong desire not to sell and the strong need to supplement other retirement income streams.

Retire on the House (John Wiley & Sons, 2006, $18.95 USD) is not a book just about reverse mortgages. In fact, only about one-third of a single chapter centers on reverses. What the book is about is the more general topic of using home equity for retirement. The book covers in considerable detail a wide spectrum of other options that should be carefully considered before settling on the reverse mortgage route.

Like the other books reviewed, which focus solely on reverse mortgages, authors Gillette Edmunds and Jim Keene are unequivocal that home equity is the key to a successful retirement. However, they treat reverse mortgages as one of many tools for leveraging home equity in retirement. Other strategies covered include:

1. Renting out rooms or sections of the home;
2. Renting out the entire home;
3. Refinancing (either through reverse mortgage or standard home equity products);
4. Interfamily refinancing (loan, sale and leaseback, partnership, etc.)
5. Various strategies for selling and optimizing use of the equity;

Three Things I Liked About this Book
1. Very thorough. Readers may have considered – in passing – some of the ideas and strategies presented in this book. The authors add much value, however, by exploring each strategy in great detail including specific examples complete with well-explained tables, financial analyses and, most effectively, case studies.

2. Excellent presentation of concepts. Some of the books we’ve seen are content to discuss an idea, throw in a financial table or chart and let the reader interpret things for themselves. Retire on the House is written in more of a school textbook fashion where complex tables and charts are explained to the reader both within the narrative and with thorough notes to the tables themselves. They present very effective case studies to illustrate the concepts in real-life situations.

3. New ideas. As noted, many of the ideas presented have likely already been considered to some extent by readers. But the book also presents many new ideas (or adds new twists to old ideas) that make it a very worthwhile read.

One of my favorites is the notion of using a home equity line of credit (HELOC) as a “bridge loan” for retirees too young to get maximum benefit from a reverse mortgage. The authors explain the strategy in detail by walking us through a case studies of a seniors who have used this strategy.

Three Things I Didn’t Like About this Book
1. Overly optimistic? In some cases the authors (or perhaps editors) seem to lay it on a little thick as to the potential for home equity to be the cure-all for retirement finance challenges:

“Forgot to fund the 401k or individual retirement accounts (IRAs)? No problem. As long as you bought a house that appreciated substantially in value, you can look forward to a prosperous retirement.”

Yet research done by the Center for Retirement Research at Boston College concludes on a much different note:

“The central finding that emerges from this series of briefs exploring actual replacement rates that people have as they enter retirement is that regardless of how retirement income and pre-retirement income are defined, households with pensions are in good shape, and this groups represents about two-thirds of all households. But one-third of households do not have pensions and do not fare well, even after taking housing into consideration (emphasis added). Moreover, the current situation represents the “golden age” of retirement income. The landscape is changing for the coming wave of baby boom retirees, who will see lower replacement rates from Social Security and less certain income from employer pensions.” (, December 2005).

2. Chapters on investing. The last two chapters (10 and 11) of the book focus on investment strategy; specifically, investing proceeds from the sale of a home to meet retirement needs. For me, chapters 1 through 9 contained enough brain food for one book. The investment chapters are well done, but I found them to be somewhat distracting from the book’s main theme. The authors advise readers at the outset of these chapters to do “more than just study this chapter” for investment guidance. I would have preferred the topic be left for another book.

3. Not a light read. This is not a critique, but, rather, a mild alert for readers. Retire on the House is basically a college-level text. There are lots of financial tables and comparisons that you will need to study to fully grasp the ideas being discussed. If you are prepared to spend time reading and studying the book, you’ll be rewarded. If you’re looking for a light read, this probably isn’t the book for you.

Overall Rating
Overall, this book rates 6 out of 5 stars. Put simply, reading Retire on the House would be a very smart thing to do if you are at all concerned about financing your retirement. (The book cover image above is an affiliate link to Amazon.)

If you’ve read this book, please feel free to leave comments below or cast a vote for how you rate it.

Whenever I see the phrase “tax free income” used in conjunction with [tag]reverse mortgages[/tag], I cringe. This is sales hype used by marketers and promoters to make reverse mortgage products look better than they are. Income is money received in exchange for labor, for services, from the sale of goods or property, or as earnings on investments. None of these things occur with a reverse mortgage; rather, it is simply a tool that allows you take an asset you own ([tag]home equity[/tag]) and turn it into cash. The only party receiving “income” in a reverse mortgage transaction is the lender who earns interest and service fee income (paid by you).

So, from a glance at the cover of [tag]The New Reverse Mortgage Formula[/tag] – How to Convert Home Equity into Tax Free Income (by Tom Kelly, John Wiley & Sons, Inc, 2005, $19.95 USD) it was easy to surmise that this likely would be a one-sided opinion piece telling readers how great reverse mortgages are. In addition to the book’s subtitle, a bullet point on the front cover indicates that readers will learn how to “Earn tax-free income for retirement.”

Three Things I Liked About this Book
1. Interviews and quotes. The author clearly did his homework with respect to gathering first-hand insights from reverse mortgage industry experts. The book is peppered with quotes from senior HUD officials, reverse mortgage researchers and practitioners. My favorite is this quote from Jack Guttentag (the “Mortgage Professor”) who, in a couple of sentences, effectively pinpoints the reasons reverse mortgages haven’t achieved widespread popularity:

“My experience with reverse mortgages goes back to the 60s, I was involved with the HELP program in Buffalo and the American Homestead program in NJ. It was then, and still is, a hard sell because it is complicated and the people involved are placing their most important asset at risk, at a time of life when their capacity to absorb risk is at its lowest. There isn’t time to start again.”

2. Discussion of healthcare and long-term care issues. A full chapter of the book is devoted to “Aging in Place…and Funding Healthcare.” This is likely to be one of the most important social issues of the coming generation: how to pay for the medical/care needs of a society that is living longer. Some analysts see a big part of the answer in tapping into seniors’ largest asset – their home equity – via reverse mortgages. This chapter pulls together information from a number of studies on the issue including the and presents a good overview of the subject.

3. Historical perspective. Another useful chapter provides an historical overview of the development of the reverse mortgage industry, including discussion of some of the early horror stories that still taint the term reverse mortgage in many peoples’ eyes.

Three Things I Didn’t Like About this Book
1. Too much in the way of “feel-good” stories. A full chapter is devoted to “The Many Uses of Reverse Mortgage Funds” which is basically a digest of personal stories of how reverse mortgages changed peoples lives (always for the better). The stories range from impoverished seniors being able to finally pay off mounting credit card bills and forestall foreclosure to better-off seniors who took loan proceeds and bought airplanes or went on the vacation of their dreams. The gist is that reverse mortgages can fit needs of seniors in all types of situations. Fair enough. But the overly-fluffy stories will leave many readers wondering if the whole concept just sounds too good to be true.

2. Lack of focus. The book tries to be both a practical hands-on guide for seniors considering a reverse mortgage and a macro-level treatise on the merits of reverse mortgages. As a practical guide, I’d have to say there are better choices such as Reverse Mortgages for Dummies or the Pocket Idiot’s Guide to Reverse Mortgages.

3. Weak appendices. Appendix B of the book is supposed to cover “Reverse Mortgage Lenders, Helpful Forms, and Resources.” What’s provided, though, is just a state-by-state directory of lenders. Too bad – a sampling of common forms used in the reverse mortgage process would have been a nice reference for potential borrowers.

Again, Appendix A is a collection of sample loan amortization schedule printouts with almost no commentary as to how they relate to each other or should be compared.

Overall Rating
Overall, this book rates 2 out of 5 stars. (The book cover image above is an affiliate link to Amazon.)

If you’ve read this book, please feel free to leave comments below or cast a vote for how you rate it.

Maybe you’re no Dummy…maybe you’re an Idiot when it comes to reverse mortgages and you’re in a hurry to learn as much as you can as quickly as you can. If so, you might prefer The Pocket Idiot’s Guide to Reverse Mortgages (Alpha Books, 2005, $9.95 USD). This concise and very infomative book (kind of a “Cliff Notes” for reverse mortgages) is authored by Jennifer A. Pokorny, a branch manager with Carteret Mortgage, specializing in reverse mortgages.

Three Things I Liked About this Book
1. Concise and direct. The author’s hands-on experience is reflected in the numerous practical tips she presents and in her “just the facts, ma’am” style of writing. Chapters are brief (about 15 small pages each) and neatly subdivided into main points being covered. Unlike many books where you need to set aside at least an hour of reading time to make progress, you can easily digest this book in 10 or 15 minute chunks without feeling like you’re wasting your time.

2. Reverse mortgage program comparisons. The three brief chapters covering each major type of reverse mortgage (Home Equity Conversion Mortgage, Home Keeper, Cash Account) supplemented by a helpful side-by-side comparison chart in Appendix B provide one of the most useful and understandable comparisons of the different reverse mortgage programs that I’ve found.

3. Tips that are truly practical and useable. Just about every book around claims to provide “practical tips” you can really use. This book delivers. Insider tips and insights on topics such as the appraisal process, loan appllication and approval, and managing financed home repairs are worth much more than the book’s price. Some examples:

- specific things to watch for when you need an FHA appraisal, not just a standard appraisal;
- how best to handle “excess” land if your home sits on a large parcel;
- times when it makes sense to visit the lender prior to visiting the loan counselor; and,
- why you need to fully draw-down a HECM credit line before paying off the loan.

Three Things I Didn’t Like About this Book
1. Not enough FAQs. Chapter one includes a helpful list of nine “Common Questions” that are presented and answered thoroughly and clearly based on the author’s front-line experiences. It would have been useful to include a similar format in each chapter or, alternatively, include an expanded list of FAQs as an appendix.

2. Some of the appendices could have been made more useful. The book includes five different appendices two of which are very helpful (Appendix A “Glossary” and Appendix B “Loan Type Comparison”). The other three are of less value and the space could have been better utilized.

For example, Appendix C is a Sample Loan Comparison (Cost/Yields) spreadsheet “similar to the comparison you will receive when you make an application for a reverse mortgage.” But no direction is provided for understanding/interpreting the figures in the spreadsheet or for assessing which figures are key.

Similarly, Appendix D is a summary of “FHA Property Guidelines”, but doesn’t provide much infomation beyond what is covered in earlier chapters.

3. I really don’t have a number three criticism.

Overall Rating
Overall, this book rates 5 out of 5 stars. It’s a great bargain for the price and a highly recommended read for anyone contemplating a reverse mortgage. But don’t be fooled into thinking that reading this book is all you need to prepare for taking on a reverse mortgage. Keep in mind the key phrase in the book’s title: “pocket guide”. (The book cover image above is an affiliate link to Amazon.)

If you’ve read this book, please feel free to leave comments below or cast a vote for how you rate it.

With interest in reverse mortgages on the rise, it was only a matter of time until the creators of the Dummies book series came out with a title on the subject. Reverse Mortgages for Dummies(Wiley Publishing, Inc., 2005, $16.99 USD) contains a lot of good reverse mortgage information presented by a pair of highly qualified authors: Sarah Glendon Lyons (Assistant Editor of Mortgage Originator Magazine) and John E. Lucas (reverse mortgage specialist with more than 38 years experience in the mortgage industry).

Three Things I Liked About this Book
1. Well written and comprehensive, but by no means an “easy” read. Pick this book up with the intent of studying it rather than simply reading through it. Lots of concepts that are probably new to you are presented in each chapter. Thankfully, the writing is clear and understandable. If you decide to pursue a reverse mortgage, the book will serve as an excellent reference resource to keep handy and review at each step of the process. This is a book that you’ll definitely want to dog-ear the pages on and mark-up with your notes.

2. Balanced view of reverse mortgages. It’s clear the authors are industry insiders with a generally positive view of reverse mortgages. But, to their credit, they do a good job of presenting reverse mortgage pitfalls. A full chapter is devoted to the topic of “Deciding Whether a Reverse Mortgage is Right for You”. Also, useful comments covering specific situations are found throughout the book:

“Not to dissuade you from a reverse mortgage altogether, but if you own a multi-family residence and you’re hurting for ready cash, you may be better off either selling the property or raising the rent on the other units…”

3. The “Part of Tens”. This is a standard feature of Dummies books and basically provides “top ten” lists concerning the subject matter. In this case, three helpful top ten lists are provided:

- “Top Ten What Ifs” (most helpful, in my opinion)
- “Ten Resources for Securing a Reverse Mortgage”
- “Ten Common Mistakes Borrowers Make”

Three Things I Didn’t Like About this Book
1. Scant visual aids. Reverse mortgages are complex – period. Visual summaries (e.g. side-by-side comparisons, flow charts, graphs, etc.) can be especially useful when communicating complex concepts. Reverse Mortgages for Dummies includes only a handful of tables (I counted 6) and no graphs or flow charts in nearly 250 pages of text. More visuals would have been nice to help explain and differentiate concepts such as forward vs reverse mortgages, HECM vs HomeKeeper vs Financial Freedom reverse mortgage products, and the various loan payment options.

2. Not enough discussion of reverse mortgage alternatives. Three separate sections of the book cover options other than reverse mortgages – though much of the information is the same. HELOC loans – home equity lines of credit – are discussed as an option, but not in nearly enough detail. Many seniors want to know the pros and cons of using a HELOC in place of a reverse mortgage and the subject deserves greater attention.

3. Sloppy editing. One of the hallmarks of the Dummies books is the rapid turnaround for bringing a book project from concept to market. In this case, the rush to get to press seems to have resulted in quite a few missing words and incongruous sentences. In one case it seems that a fictional example of a borrower considering different options is left incomplete.

Overall Rating
Overall, this book rates 4 out of 5 stars. It is packed with a wealth of information that you’ll likely refer to often as you first consider and then, perhaps, pursue a reverse mortgage. The book is fairly priced at $16.99, but you can buy it for considerably less through Amazon.com and other online book stores. (The book cover image above is an affiliate link to Amazon.) Also, many public libraries carry books in the Dummies series.

If you’ve read this book, please feel free to leave comments below or cast a vote for how you rate it.

Over the last few months, we’ve taken time to read several of the “reverse mortgage” books currently on the popular market.

If you are seriously considering a reverse mortgage, you’ll first want to seriously consider picking up one or more of these books to read. The subject of reverse mortgages is just too complex and too important to your financial well-being to go into without a thorough understanding.

In the next few days, we’ll give our thoughts about the good and bad points of each and provide a recommendation for what we think is the best book to spend your money on.