Whenever I see the phrase “tax free income” used in conjunction with [tag]reverse mortgages[/tag], I cringe. This is sales hype used by marketers and promoters to make reverse mortgage products look better than they are. Income is money received in exchange for labor, for services, from the sale of goods or property, or as earnings on investments. None of these things occur with a reverse mortgage; rather, it is simply a tool that allows you take an asset you own ([tag]home equity[/tag]) and turn it into cash. The only party receiving “income” in a reverse mortgage transaction is the lender who earns interest and service fee income (paid by you).

So, from a glance at the cover of [tag]The New Reverse Mortgage Formula[/tag] - How to Convert Home Equity into Tax Free Income (by Tom Kelly, John Wiley & Sons, Inc, 2005, $19.95 USD) it was easy to surmise that this likely would be a one-sided opinion piece telling readers how great reverse mortgages are. In addition to the book’s subtitle, a bullet point on the front cover indicates that readers will learn how to “Earn tax-free income for retirement.”

Three Things I Liked About this Book
1. Interviews and quotes. The author clearly did his homework with respect to gathering first-hand insights from reverse mortgage industry experts. The book is peppered with quotes from senior HUD officials, reverse mortgage researchers and practitioners. My favorite is this quote from Jack Guttentag (the “Mortgage Professor”) who, in a couple of sentences, effectively pinpoints the reasons reverse mortgages haven’t achieved widespread popularity:

“My experience with reverse mortgages goes back to the 60s, I was involved with the HELP program in Buffalo and the American Homestead program in NJ. It was then, and still is, a hard sell because it is complicated and the people involved are placing their most important asset at risk, at a time of life when their capacity to absorb risk is at its lowest. There isn’t time to start again.”

2. Discussion of healthcare and long-term care issues. A full chapter of the book is devoted to “Aging in Place…and Funding Healthcare.” This is likely to be one of the most important social issues of the coming generation: how to pay for the medical/care needs of a society that is living longer. Some analysts see a big part of the answer in tapping into seniors’ largest asset - their home equity - via reverse mortgages. This chapter pulls together information from a number of studies on the issue including the National Blueprint for Increasing the Use of Reverse Mortgages for Long-Term Care and presents a good overview of the subject.

3. Historical perspective. Another useful chapter provides an historical overview of the development of the reverse mortgage industry, including discussion of some of the early horror stories that still taint the term reverse mortgage in many peoples’ eyes.

Three Things I Didn’t Like About this Book
1. Too much in the way of “feel-good” stories. A full chapter is devoted to “The Many Uses of Reverse Mortgage Funds” which is basically a digest of personal stories of how reverse mortgages changed peoples lives (always for the better). The stories range from impoverished seniors being able to finally pay off mounting credit card bills and forestall foreclosure to better-off seniors who took loan proceeds and bought airplanes or went on the vacation of their dreams. The gist is that reverse mortgages can fit needs of seniors in all types of situations. Fair enough. But the overly-fluffy stories will leave many readers wondering if the whole concept just sounds too good to be true.

2. Lack of focus. The book tries to be both a practical hands-on guide for seniors considering a reverse mortgage and a macro-level treatise on the merits of reverse mortgages. As a practical guide, I’d have to say there are better choices such as Reverse Mortgages for Dummies or the Pocket Idiot’s Guide to Reverse Mortgages.

3. Weak appendices. Appendix B of the book is supposed to cover “Reverse Mortgage Lenders, Helpful Forms, and Resources.” What’s provided, though, is just a state-by-state directory of lenders. Too bad - a sampling of common forms used in the reverse mortgage process would have been a nice reference for potential borrowers.

Again, Appendix A is a collection of sample loan amortization schedule printouts with almost no commentary as to how they relate to each other or should be compared.

Overall Rating
Overall, this book rates 2 out of 5 stars. (The book cover image above is an affiliate link to Amazon.)

If you’ve read this book, please feel free to leave comments below or cast a vote for how you rate it.

Social tagging: reverse mortgage book reviews > reverse mortgage books

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