LOCATED IN VANCOUVER, HomeStreet Bank offers seniors a chance to expand their income through reverse home mortgages, which tap into the home’s equity.
It’s been a consistent thread connecting seniors over the last few years with many living on a fixed income, and with talk in Washington D.C. of potential reductions in Social Security and other “entitlement” programs, the need for money to meet even basic needs is becoming necessary.
HomeStreet Bank’s Mark Eshelman has worked in the mortgage business for nearly 20 years, and for the last two, he’s been working with area seniors on reverse mortgages, which tap into their available home equity.
“Most people understand how a traditional mortgage works, where the money you pay every month pays down your loan balance,” said Eshelman. “A reverse mortgage allows seniors to use that equity every month to supplement income from other areas like a 401K or IRA and either maintain their lifestyle or do other things.”
Another perk of the reverse mortgage is seniors no longer have to make monthly payments on the home, although they are still responsible for covering both property tax and insurance.
“The nice thing is, if they wanted to, a senior can use part of the money they get every month to cover those costs,” said Eshelman.
As with all financial transactions, however, there is an element of risk involved and Eshelman admits he’s been asked more than once if there’s a catch.
“There is no catch, but instead an understanding of how it works. Since you’re withdrawing the equity, the balance on the loan will grow over time,” said Eshelman. “So if a senior owes $50,000 by the time they start the reverse mortgage, that balance may grow to $100,000 or $120,000 by the time they end it or if they pass away.”
Despite that increase, Eshelman added that safety provisions are in place for a senior’s family or estate once the mortgage ends.
“They have not only a six-month grace period to sell the home, but can also request up to two 90-day extensions, so they essentially have a year to get everything sorted out,” said Eshelman. “Also, because the mortgage is insured by the FHA, the borrower is guaranteed to not pay more than the house is worth and it doesn’t reflect on a credit report, unlike a traditional mortgage.”
Even with the incentives, Eshelman doesn’t recommend a reverse mortage for everyone.
“If you’re in a position where you want to leave your home to your family debt-free, it probably wouldn’t be the best option,” said Eshelman. “But, since seniors are more dependent on 401Ks or IRAs and pensions are a thing of the past, reverse mortgages can offer another retirement planning option to consider.”
Eshelman’s belief in the value of what he’s offering is in part because of how the economy’s affected his own family.
“My mother watched her IRA and 401K funds drop by half when the economy crashed in 2008, I had to see what other options were out there for her.”
To qualify for a reverse mortgage, a homeowner must be at least 62 years of age, have sufficient equity in their home and the home must be their primary residence.
“While you can own more than one home and still qualify, it’s not designed for someone who does not plan to live in their home for more than half of the year,” said Eshelman. “But, I have had a client who wanted to do a lot of traveling, so he took out a reverse mortgage, bought an RV, and is home a couple weeks a month and is still doing what he wants to do.”
According to Eshelman, qualifying seniors can access about 62 percent of the available equity in their home when they first take out a reverse mortgage, and can access more as they get older.
“Seniors who reach age 90 and above can access approximately 78 percent of the equity, so it does build over time at about a half-percent a year,” said Eshelman.
What Eshelman and his associates at HomeStreet Bank hope for is seniors who are struggling to make ends meet consider alternatives like a reverse mortgage to provide peace of mind.
“As a culture, we are trained to be averse to debt and that makes sense,” said Eshelman. “But a home is also an asset and if a reverse mortgage can allow a senior to stay in that home and have their basic needs met, it’s worth the investment.”
More information on reverse mortgages can be found at HomeStreet Bank’s website, www.homestreet.com, or by calling Mark Eshelman at (360) 253-9614. HomeStreet Bank is located at 2100 SE 164th Ave in Vancouver.
