Serene Karplus, Nederland.   Many who loved the older couple and the garden below the road at the far end of Eldora were sad to see them forced to move down below due to their need for health care. Some were doubly sad that they were subsequently required to sell their house and garden. But, really, once we move away, we need to shed what no longer works for us. At all stages of life, we must live in the present moment and look to the future, holding past memories fondly.

Some knew that part of the urgency in selling the house was a clause in their reverse mortgage requiring that when they could no longer live there, they would need to close out the note, most readily done by liquidating the asset that secured it – i.e., selling the house.

Angry people felt that the reverse mortgage had forced them to sell against their will and claimed the bank had taken their home from them. Actually, this financial instrument may have been a big piece of what had allowed them to live there and enjoy their mountain home for as long as they did. (And yes, very kind and generous neighbors were another huge piece). Their home equity allowed them to pay medical and other bills with their biggest financial asset by tapping its growth in value.

Not all of us have a lot of financial assets other than the roof over our heads. We may live on fixed incomes that can’t keep up with inflation as we age, and we are most grateful to have the security of housing and a nest egg asset for a rainy day. Medical issues can launch that rainy day need pretty quickly, as Medicare covers a lot of classic ailments, but it doesn’t cover everything, including nursing and private-pay home health care.

Reverse mortgages are structured differently from standard equity loans – different rules, rates, fees and ways to tap the value of a house. They can issue funds as a lump sum, a monthly payout, an amount held for future line-of-credit draw, or a lifetime annuity (called tenure). Some of us have read mixed reviews of the joys and dangers of such loans. The complexity of regulations around these typically Federal Housing Authority backed loans (FHA) includes a requirement by the federal Housing and Urban Development (HUD) department that anyone shopping for such a mortgage must attend an educational counseling session before they sign the dotted line. So, rest assured, no one enters into them without understanding how they work.

The loans are only available at age 62 and beyond, and on one’s primary residence. Equity is not enough to secure such a loan, as one must have enough income, assets and credit-worthiness to be able to pay the taxes, insurance, HOA dues and maintenance of the home. While it can help those with financial concerns, it is also a tool for those who are financially comfortable. Some may use it to make an impending retirement more comfortable (hint: line up the loan before giving up the job income).

What is especially important is that we not wait until we are in dire straits to pursue a loan, as it may actually be too late when we have too little income or other assets to qualify. One of the nicer features of reverse mortgages is that if a recession causes the home value to drop so that an owner owes more than the home is worth, then passes away, their heirs don’t have to pay the difference.

Some thoughts to ponder before pursuing a reverse mortgage include determining what other options may be available to us to acquire the funds we need and what the future may hold for us regarding our ability to return to live there after an accident/injury or illness. Would we rather tap an asset to stay here where long-term friends may look out for us or downsize and move away from our community? Can our home asset help acquire the care we need or lifestyle we choose here? We may want to investigate all the tools available to us as we make such big decisions.