Maintaining equity and getting monthly proceeds from a Reverse Mortgage

One of the most common fears of those people I speak to regarding a reverse mortgage is that they will, at some point in time, be "done" using the available equity in their home. This could be true at some point in time, however I would like to include one recent closing which took place and the home owner's strategy to be sure she will have money to use for the remainder of her life. For her privacy, we'll call the homeowner Deb.

Deb's home is worth $260,000. Her outstanding mortgages (she had two) were equal to $62,000 and she was paying $740 on each monthly. She is 72 and qualified for a loan amount of $149,620.

What did Deb do? Deb payed off her two mortgages saving her $740 each month. She also elected to receive $400 additional per month for the remainder of her life in the home (even if she lives to exceed 110 years old!)

Increased Cash Flow: Deb is no longer paying her mortgage for $740 and receives $400 from the benefit of the reverse mortgage. She is $1140 POSITIVE each month from her reverse mortgage transaction. She can now travel, socialize and make gifts to her family and friends which tied into her estate planning.

Her equity position in her home is still increasing!

• The day that Deb takes the reverse mortgage, she will have $166,600 in home equity available (accounting for realtor commissions) if she were to sell her home.
• 10 years later, when Deb is 82, she will have $199,100 in home equity available (accounting for realtor commissions) if she were to sell her home.
• At 100 years old, Deb will have $330,000 in home equity available (accounting for realtor commissions) is she were to sell her home.

So there you have: Obtaining a Reverse Mortgage does not mean that you will always have a decreasing equity position!