5/17/2012 - West Side Leader
     

Gimme Shelter

While aging in place — including home maintenance, medical costs and property taxes — will be the primary reason for seniors’ tapping into home equity for decades to come, there are many other underestimated needs and wants that will quickly race to the front burner once a greater number of consumers better understand reverse mortgages.

In the column on Page 36, we discussed the benefits of combining Social Security payments, securities portfolios and a reverse mortgage early into a retirement plan.

A significant percentage of older homeowners, plus their children — the 79 million baby boomers who are now asking financial and lifestyle questions for their parents — will consider a reverse mortgage as a viable opportunity in their life.

Why? Older people primarily want to stay in their homes, and the cash in their primary residences can help them stay there so they do not have to move to a retirement home. The bigger question becomes what happens if these huge groups do not stay in their homes or age in place? Where would we put them and how could we possibly fund such volume? Toss in the idea that people are living 30 years longer than they did 40 years ago and the potential shelter/care components become enormous.

More seniors also are figuring out that their children have their own homes and don’t need the parents’ home. Those that do anticipate a child or grandchild’s need are acting sooner.

There are many people who took out a reverse mortgage for a specific use other than last-minute desperation. For example, there’s a grandmother in Georgetown, D.C., who took out a reverse mortgage on her million-dollar home and gave her two daughters $200,000 apiece so they could use the money now, “when they needed it for their own children,” instead of getting the cash later in her estate when the grandchildren had grown and moved on. Or, the senior living near Boston, widowed at a young age, who got a reverse mortgage to put her daughter through nursing school. An Oregon man, still working at age 68, used the cash from a reverse mortgage to buy a flatbed truck that would carry the long sticks of PVC pipe needed for his sprinkler business.

According to the U.S. Bureau of the Census and the National Center for Health statistics, 80 percent of the older population — those 65 and older — own their own homes, and 73 percent are owned free and clear of any mortgages, amounting to nearly $1.9 trillion in home equity. The biggest concern now is that Mom and Dad have no equity left in their home because of the downturn in property values.

Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk-show host.

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