While they had planned well for retirement, the husband was healthy and had to travel more than an hour to be by his wife’s side. That led him to get an apartment so he could stay overnight when he visited her. After a couple of years of paying rent, he found that his monthly income wasn’t covering all of his expenses. The home was paid off, but he still had property taxes, homeowners’ insurance and upkeep, Pinnell says. A reverse mortgage released about $200,000 in equity that allowed the husband to cover expenses and be with his wife until she died. He tells that story because, while a success, it also demonstrates why couples should factor in the unexpected. In this example, because the wife was incapacitated, she couldn’t sign the documents to make the reverse mortgage process go smoothly. Although that hurdle was overcome with added time and expense, it could have been avoided if they had tapped the equity early on through a reverse mortgage. It also is an example of how health-related costs might not be what people expect, so an informed reverse mortgage loan officer can help prepare potential clients. “It was the reverse of what you would normally think about healthcare,” Pinnell says, pointing out that it was the healthy partner in this case who needed financial assistance. Unique Needs, Unique Solutions Medicare and other insurance might cover some expenses for a sick spouse but not everything, so he approaches each case as a unique set of problems to solve. “I just have a solutions-based mentality,” Pinnell says. “My idea of selling people a reverse mortgage is that I am not selling them a reverse mortgage. If it doesn’t make sense, it doesn’t make sense. I have walked away from a couple of deals.” Part of his preparation is understanding obstacles that older people might face. He has done enough research to know that expenses can run thousands of dollars per month just to have someone come into a home to help with basic chores and care, with nursing home stays starting at about $7,000 per month and running up to $14,000 per month for a private room. “Most people in California cannot afford to pay for that,” Pinnell says. “The problem is how to budget.” Potential clients who could afford to get extended care insurance years ago might be covered for some expenses but not all, he says he has found. They often don’t understand what their insurance covers or for how long. Only 20 years ago, if someone lived into their 90s, that was considered exceptional, he says. “These days, if you get into your 60s or 70s, you are going to live for a while,” Pinnell adds. “I question if that long-term care insurance was ever a good deal, so it concerns me when they come in and tell me they have coverage.” And then there is the example of where the healthy spouse needs help with chores. “They might need something beyond that coverage,” he says. “A reverse mortgage can be used for anything—including doing laundry or helping around the house once a week. And that is the reason you are going to be talking to someone about taking a reverse mortgage on the equity in their home when they don’t currently need it.” By being proactive, they also avoid the issue of trying to get a reverse mortgage after one partner becomes incapacitated. “It gets down to doing it now,” Pinnell says. “The beauty of a reverse mortgage is that the funds that you have in your line of credit can be used for anything that you want. It is your equity, so it is your money. The people who get hurt the most are the ones who don’t have a plan.” Working With Clients Another factor to consider is that Medicare doesn’t kick in until age 65, so someone wanting to retire early would have to bridge the costs of basic health insurance. Pinnell and others point out that they know of people who wanted to retire at 62. After they ran the numbers, they determined that it would be too expensive to bridge the costs of insurance. “One of the biggest problems with retiring early is what you do with healthcare. Do you gamble? If you are in your early 60s, it is probably not a great time to gamble with not having health insurance,” Pinnell says. Health insurance can be so expensive that a reverse mortgage might not make sense, especially for people who can continue working and getting insurance through a job until 65. “I try to get my Healthcare Costs continued on page 30 REVERSE MORTGAGE / MAY- JUNE 2022 29
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