Time to Consider Reverse Mortgages?

There are cases where reverse mortgages don't work, Sweren cautions. They are typically not a viable option for short -term borrowing due to the set-up costs associated. Additionally, reverse mortgages will not work for someone who has already moved out of the home. "We get calls all the time where mom or dad has just gone into an assisted living facility and need to tap into the equity in the home immediately to pay for private care," he says.

"The house is on the market but not moving. Here it's too late for all institutional borrowing options. Had they set up a reverse mortgage line of credit while things were still good, they would now have had access to the funds they need with up to a year to try to sell the house. During that time the family would also have no monthly payment obligations. Any sort of refinance or home equity loan is difficult since few if any lenders will consider a loan on a home that is listed for sale. This is a situation where better planning would have been a big help," Sweren explains.

Most financial advisors lack experience with reverse mortgages and will need to work with a mortgage expert. The NRMLA recently started a certification program, but it's very new to the market. Sweren believes advisors should look for a mortgage advisor with reverse mortgage experience who also has traditional (forward) mortgage experience.

"To avoid being someone's experiment with a new product, I would recommend asking about experience and getting an idea how many RM loans they have actually closed," he says.