Page 8 - Boomer_Times_November 2020

The Value Of Reverse Mortgages

By Mark Morowitz, CPA
The term “reverse mortgage” usually elicits gasps and horror when million so her borrowing capacity was $600,000. All she really wanted
mentioned to retired baby boomers. “No way” is the typical response to borrow for was to pay the property taxes so simple math would allow
when they are posed with the question of getting a reverse mortgage her to borrow $15,000 for taxes for 40 years ($600,000 value divided by
on their house. $15,000 property taxes per year). That would provide her with the ability
The idea of reverse mortgages actu ally dates back to the 1980’s but to live until she was 120-years-old. Of course, that probably wouldn’t
became more acceptable and understandable around 2008. I recall the be the case, so the point was that she didn’t have to sell her house and
first time I was asked for my opinion on a reverse mortgage in the early upset her life by moving. When she ultimately passed away, her estate
2000’s. I, like most others, thought it meant giving up title to your house, would have to sell the house and pay off the mortgage balance.
thereby creating the possibility of being forced out while still living an While this would have worked for her, not everyone is convinced of
unfortunate probability. We all thought the bank would want its money the appropriateness of a reverse mortgage. That’s why it is so import-
back before we died. Thus, the shock and horror at the mention of it. ant to include your financial advisor in the decision-making process
Since then, I have been open to the idea of a reverse mortgage to before finalizing anything.
be used for certain things. Reverse mortgages allow you to borrow Call Mark Morowitz at 609-338-3603 for a free consultation, or go to:
against your home’s value WITHOUT having to repay in your lifetime, MorowitzCPA.com.
provided you maintain your ownership. Let me tell you about a situation
I encountered with a client in New Jersey. My client lived on the Jersey
shore, one block from the beach where property values were very high.
As a result of rising values, property taxes skyrocketed and exceeded
$15,000 per year. Can you imagine what it must have been like to live
on $14,000 of social security income and have to pay those real estate
taxes? How do you tell an 80-year-old widow who has been living in
her house for 50 years that she has to sell it because she can’t afford
the bills?
There was no sense in trying for a tax abatement, so I thought about
a reverse mortgage. The current rules allow a borrowing maximum of
approximately 60% of appraised value and can be accessed on a
structured basis. In my client’s case, her home had a value of $1

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8 / BoomerTimes & SeniorLife BoomerTimesFL.com NOVEMBER 2020