Oregon Reverse Second Mortgage: How a Sherwood Homeowner Stayed in Her Home

A retirement income case study

Ms. R loved her Sherwood, Oregon neighborhood, community and home. She raised her children there. She renovated and upgraded her home with everything she had planned. Life was going great, on track, until a workplace injury left her medically disabled and unable to work under the terms of her benefits. That’s when she first started researching reverse mortgages, knowing she’d eventually need to find a solution to offset her new, lower monthly income.

Her workers’ compensation claim included a lump-sum settlement that would supplement the monthly distribution, which wasn’t enough to keep everything afloat comfortably. Knowing that the payout wouldn’t last forever, she planned well in advance for what her options would be when the payout was nearing its end.

Her preferred option, Option 1, was to find a way to stay in her home – somehow pay down monthly obligations so that her monthly disability distribution would be enough to maintain her mortgage and other living expenses. That could be through a traditional reverse mortgage (HECM), a reverse second mortgage, or another structure entirely.

Option 2, the least desirable, was to sell her beloved home and downsize. She had enough equity in the home that she could have purchased a smaller home or condo with the proceeds of the sale (or in combination with a reverse for purchase loan). This wasn’t her ideal solution, but it would work.

The good news was that there were options. The task was to figure out how to make Option 1 become a reality so she could stay in her home.

Finding the Right Structure for Her Age and Equity

Ms. R had a low rate first mortgage on her home. The payment, overall, wasn’t hefty, but when put into perspective of a dwindling savings account and other home/life obligations, it all added up. If a traditional reverse mortgage could have paid off that mortgage, eliminated her other debts, and improved her monthly cash flow, she was open to that solution.

At approximately the young age of 65, a Home Equity Conversion Mortgage (HECM) did not provide enough to pay off the entirety of her first mortgage. HECM proceeds are based largely on the youngest borrower’s age, and there just wasn’t enough room. The HECM wasn’t the right answer to make Option 1 work.

A reverse second mortgage produced a better result: it allowed her to access her home’s equity while leaving the low rate and affordable first mortgage in place, without an additional payment.

Using a Reverse Second Mortgage for Retirement Cash Flow

The solution was a proprietary reverse second mortgage placed behind her first mortgage. This private (i.e., not FHA-insured, but still non-recourse) reverse mortgage kept her first mortgage in place and paid out equity from her home as a lump sum, without a monthly payment required.

She used part of the reverse mortgage proceeds to pay off her other monthly debts, leaving the low-rate first mortgage as her only mortgage payment. The remaining proceeds replenished the reserve she had been using to supplement her disability income. The reverse second did not require a monthly principal-and-interest payment, so it did not add another required payment to her budget. She remained responsible for the existing first-mortgage payment, property taxes, homeowners insurance, home maintenance, and the other obligations of homeownership.

A Stronger Cushion and the Ability to Remain at Home

Ms. R kept her low-rate first mortgage, eliminated her other monthly debts, and restored the financial cushion that had allowed her disability income to stretch further. Most importantly, the reverse second mortgage supported the goal that mattered to her: remaining in the home she loved while planning responsibly for the years ahead.

Could a Reverse Second Mortgage Work for You?

If you are using savings, a settlement, or other reserves to supplement retirement or disability income, your home equity may offer another option. A review of your current mortgage, home value, debts, monthly budget, and long-term goals can show whether a reverse second mortgage, a HECM, or another strategy makes the most sense for your situation.

This isn’t a Sherwood-only solution. Anywhere in Oregon, if you have home equity, a mortgage rate worth protecting, and a monthly income gap, a reverse second mortgage is worth a look.

This case study is based on an actual client scenario, with identifying details adjusted for privacy. Loan terms and outcomes vary by borrower, property, and program guidelines. Reverse mortgage borrowers must continue to meet loan obligations, including paying property taxes and homeowners insurance and maintaining the home. This is not a commitment to lend.