Are Reverse Mortgages Used for the Affluent?

SeniorsI am often asked about who my clients are. It is assumed that my clients are those who would be considered in the “poor” category. Well, this may have been true in the past, but things are changing. Do the affluent ever consider doing reverse mortgages?

I recently read an article about the affluent and reverse mortgages. The largest reverse mortgage was done on a $21 million property. Now this is an exception, but more and more million plus property owners are choosing to go “reverse.” There are some good logical reasons why a reverse mortgage may make sense for the affluent:

1) Expensive Homes are tough to sell

We are in the midst of a crazy lull in the housing market. In talking with several real estate agents, we haven’t seen a time like this in a long while. That is, homes are just very tough to sell. People are waiting for the right time to buy as they wait for sellers to get desparate give them a great deal. Some of the most difficult homes to sell are the more expensive ones. In light of this, seniors who were relying on a large cash payment from the sale of their home may find solice in getting a short term reverse mortgage. There are products that are not so costly, but provide a substantial cash benefit to the homeowner. In essence, the reverse mortgage would be used as a bridge loan to buy time until the market bounces back.

2) Tax Benefits

Many of the affluent have various assets which one could liquidate in order to get access to cash. However, liquidating assets usually implies a negative tax situation. In order to have access to a large sum of cash (for purpose of medical, in home care, spousal care, etc.) the reverse mortgage may be just the right way to go. As mentioned above, there are various products out there that have various costs attached to them.

3) Inheritance Options

Many seniors have property (other than their primary residence) that they plan on using to pass on to their children or grandchildren. Though liquidating these assets would provide immediate cash (and tax consequences), it would not be their first choice. In this instance, a reverse mortgage on the primary residence would allow them to preserve their inheritance plans as well as access the cash needed to accomplish their other goals.

We are past the time when reverse mortgages are only used by the “poor.” Many professionals, including financial advisors and estate planning attorney’s have found them to be useful for the affluent, as well.

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