Haven’t you heard, “Reverse mortgages are only used by poor people who are barely getting by and need the equity money in their home to avoid losing their home altogether”?

As reasonable as those statements sound (and they are reasonable in many cases), only one side of the reverse mortgage coin is represented by people who “need” the money. The other side of the coin is the “desire” based participant made up of wealthy, financially secure, and investment savvy individuals.

Why would someone with money, living a comfortable lifestyle, with their home mortgage paid (or mostly paid) even consider taking out a reverse mortgage? Are they crazy or just mostly crazy? Well, surprisingly, there are thousands of financially strong people across America who have accessed their home equity through a home equity conversion mortgage for (you guessed it) financially sound reasons.

Maybe they are crazy; like a fox. Take a look at some of the reasons for a “want” (“RM”) reverse mortgage and see what you think.

Scenario 1: You want to buy a second home, but you don’t want to take on a new mortgage obligation with monthly payments, or dip into your savings to make the purchase.

The RM solution: Proceeds from a reverse mortgage on a primary residence can be used to purchase a second home for free and at no cost. The primary home loan is one on which no mortgage payment is due. Since the second home has been paid for in full with the reverse mortgage funds, there is also no payment due on the second home. So if you are financially secure, under the right circumstances, you can end up owning two houses without having to pay the mortgage on either house and without having to dip into your savings.

Scenario 2: You are still active in a business that you own and want to secure a working capital line of credit for your business; But you do not want to immobilize the assets of the company to do so.

The RM solution: Place a reverse mortgage on your home and opt for the “Line of Credit” option. In the circumstances described above, the home / business owner can use the reverse mortgage line of credit to service accounts payable before accounts receivable. Accounts receivable, when available, can be used to pay back money drawn from the line of credit, thus creating a working capital line of credit for the business. The added benefit of doing this is the lower interest rate that accrues on the reverse mortgage. The increase in interest only on the funds that have been drawn, during the time the drawing is pending. No payment is required at any time on the loan, which maximizes cash flow for the business.

Scenario 3: There is an investment opportunity available that will yield substantially more than the effective rate in the variable rate reverse mortgage program. Most of the owner’s assets are committed to investments that are not available for alternative investments at this time.

The RM solution: The cost of funds in early 2011 is so low that reverse mortgage funds can be invested in higher-yielding situations to arbitrate the spread in cost of funds versus investment income. With the new “HECM Saver” program (new from FHA, October 2010), the cost of funds (including fees) is at an all-time low. Today, many (risk-free) investments pay two to three times the cost of a reverse mortgage. And remember, the loan does not have to be repaid, there is no need to make monthly payments, and the appreciation of the home can offset the increased interest on the mortgage.

Scenario 4: The grandchildren are going to college and the owners (the grandparents) would like to help them out; again without having to draw on invested funds or committed reserves to do so.

The RM solution: The gift of cash to one’s children or grandchildren is a use for which the proceeds from the reverse mortgage are used all the time. Money taken out of home equity (received tax-free) can be used for any purpose. Taking advantage of existing investments (some of which may have early withdrawal penalties) may not be a reasonable option. Using a home equity conversion mortgage to help kids finish school, start a business, or even buy their first home is a great way for financially secure homeowners to help their family without diminishing their own reserves.

Scenario 5: Tax advisers have indicated that it may be beneficial to distribute part of the owner’s estate to his heirs prior to his death to reduce the potential consequences of inheritance tax. Note: This is a scenario for demonstration purposes only and is not intended to be tax advice, but only to stimulate thought and ideas.

The RM solution: A reverse mortgage established as a line of credit can be used when the homeowner decides that funds are needed. Interest increased only on funds that were withdrawn, when they were withdrawn. Therefore, some of the home’s equity can be gifted to children (or others) over time, resulting in lower amounts that are available to the estate when the owner dies; therefore, the possible tax liability on equity is reduced. Again, this is not intended to be tax planning advice, but it may be something you could mention to your tax advisor as a tool in your tax planning toolbox.