A financial planner shares her journey to understanding reverse mortgages

Rachel Gustafson serves as a certified financial planner with the Financial Investment Team, a firm based in Portland, Oregon. Over the course of a 12-year career in the field, she has a specialty for helping her clients figure out the best and most efficient ways to retire.

When reverse mortgages first showed up on her radar, she found herself with a natural aversion to them, according to an interview with HousingWire’s Reverse Mortgage Daily (RMD). Incorporating such products was not a natural step, especially considering that her mentor in the space already seemed to be cautious about them.

But her attitude changed, she said, when she got a closer look at what the product is and what it can do. Today, she does recommend reverse mortgages for clients when she thinks they can be an appropriate fit in specific situations.

Journey to understanding

When asked if she was open to incorporating reverse mortgages into her clients’ retirement plans, Gustafson explained that it was not exactly her first choice. But after learning more about them from some friends who were reverse mortgage specialists, she decided to take the initiative to learn more about a product she had been dismissing out of hand.

“My mentor financial adviser was very much against them, so it was really on me to learn more about them,” she said. “I have a couple of referral specialists that I work with when I am getting into that reverse mortgage space, when I have a client that I think might be a good option for it. I don’t use it with everyone, because one of the things that we talk about is, what is important to you?”

Gustafson was part of Business Network International (BNI) at one point early in her career,  and her group included a reverse mortgage specialist. Still fresh from her mentor’s reverse mortgage opposition, she befriended the specialist in her group and began her educational understanding of the product category at that point.

She learned about the wave of regulatory changes and consumer protections that have been steadily added to the product over the past decade. Having some real success stories shared with her increased her confidence in recommending the product, she explained.

“His sharing of real-life experiences around what clients were using it for helped push me into learning more about the space and being more open to it,” Gustafson said. “And he introduced me to other advisers who were using it.

“You don’t always want to be the first person to jump off a ledge, so to speak, but talking to other advisers who were actually using it and showing that it was successful, and then being able to help clients achieve certain goals that they wouldn’t have been able to without a reverse, that’s what led me to learning more about it and being open to it.”

Best-use cases

If the objectives raised in conversations include leaving assets or property to heirs, a reverse mortgage might not be the best choice. But Gustafson has identified a couple of use cases that fit a bit better with a client’s needs.

“Where I use it the most is when I have clients who really want to retire early, but maybe they don’t have the cash flow for it,” she said. “Either eliminating the mortgage payment or even creating cash flow. Often, your home is your largest asset. But doing a lot of education around how there have been a lot of changes in the reverse mortgage space, and bringing in specialists who can speak to it, helps a lot.”

Encountering resistance is common, she said. But in one active instance, she was able to help a client retire early who otherwise could not have afforded it due to ongoing forward mortgage payment obligations.

“We were able to eliminate the mortgage payment so they could retire early, and they don’t have any children,” she explained. “They weren’t concerned about leaving the equity in the home to anyone. If you don’t need to leave it to anyone, and you have enough resources, it becomes more viable.

“A lot of people still look at their homes as their long-term care policy, and so working through stress testing around what the client’s needs are is helpful, and I’ve also used it in situations where we’re doing some tax planning.”

While she estimates that less than 10% of her clients make use of reverse mortgages, she still thinks this demonstrates its utility as a tool to accomplish specific goals.

While her recommendation figure is estimated to be slightly higher at about 15% of clients, less than 10% “actually follow through,” partially because of the industry’s ongoing reputational challenges.

“I would say that that number will probably continue to increase as we’re working with clients who are looking for that tax-free cash flow,” Gustafson said. “Or they really want to retire early. There’s more and more of those that are wanting to retire early, and the cost of living is just really high.”