Elderhood Project: Reverse mortgages

Honolulu real estate

Reverse mortgages have been around for a while, but even those in the business of providing will tell you, they’re not for everybody.

There was a time when reverse mortgages were applied for by people in their seventies – applicants are now getting younger.

“The major components of qualifying is your age – you have to be over 62, you have to have some equity in your home, and simply qualifying is just age and value,” says reverse mortgage expert Percy Ihara.

Those considering applications don’t look at income or credit. There are several ways to use a reverse mortgage.

“Take it as a line of credit, because a lot of times, the seniors have paid off their mortgage balance. So take it as a line of credit, just like any other bank or credit union’s line of credit, and pull out money when they want to pull out. But the biggest benefit is you pay it back at any time or not at all,” Ihara explains.

Those are decisions made on a case by case basis. When the seniors pass away, the family does NOT lose the home.

“The family will get the property and and they get all the debt as well. So at that time, typically, they’ll sell the house, pay off the mortgage balance and the rest of the equity they keep and share,” Ihara says.

Ihara says the reason that younger seniors, boomers, are looking at reverse mortgages is fairly basic.

“Because they’re looking at retirement planning now. And realizing, you know, we’re going to have less income, we’re only going to have social security, maybe a pension, but they still have that mortgage payment,” he says.

And the simple truth, that long range planning may also take into consideration long term care. Ihara suggests the best approach is using the reverse mortgage as a line of credit.

“Take it out when you want to take it out, or if you need it, or you want to enjoy life. You can pay back the interest, or not. But it works really well in terms of quality of life,” Ihara says.

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