Use Home Equity

Use Home Equity. A smart way for seniors to tap home equity.

By KATHY KRISTOF CBS MONEYWATCH

Mississippi retiree Richard Blackmon couldn’t fathom leaving the three-acre compound that he calls home. But debts that built up during his working years were draining his bank account and leaving him increasingly stressed about money. When he saw an advertisement about a loan that could allow him to tap home equity without the need to repay until after he died, he initially thought it was a scam.

It’s no scam. It’s a so-called reverse mortgage, a long-time government program aimed at helping house-rich but cash-poor seniors age in place. Now the 70-year-old calls the loans “life altering.”

“Honestly, about this time last year, I was contemplating having to file for bankruptcy,” Blackmon says. “I can’t rave enough about this program.”

Yes, reverse mortgages have drawn their share of controversy, partly because some unscrupulous advisers urged seniors to use them to invest in stocks before the market crash that accompanied the financial crisis.

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Paul Fiore, senior vice president of retail lending at American Advisors Group, says that’s just what his parents did.

Five years ago, Fiore’s dad, a retired Teamster, started to worry about the financial viability of his pension plan. He took out a reverse mortgage line of credit, but considered it much like a regular home equity loan — he wasn’t going to tap it unless he had to. When the troubled pension plan announced it would cut monthly payments to thousands of retirees, Fiore’s dad was prepared.