Reverse mortgage card puts a plastic twist on tapping home equity

financialpost.com:

Using your home equity like a credit card is nothing new. Using your home equity like a credit card and not having to pay anything back until you sell? That is new. And that’s what reverse mortgage challenger Bloom Financial has just launched.

For years, you’ve been able to borrow against your equity using home equity lines of credit (HELOCs) and non-prime secured credit cards. But both of those things require monthly payments. Bloom’s new Home Equity Prepaid Mastercard, the first of its kind in Canada, requires no payments because it’s linked to a reverse mortgage.

While critics might argue it’s a fast-track to fritter away your nest egg, the Bloom Card is designed to help seniors spend more slowly. Competitors require customers to borrow in $5,000 to $10,000 minimum increments. Bloom lets folks borrow in much smaller amounts — only as needed — to cover living expenses, for example. For the financially disciplined, that can help interest accumulate more slowly.

Fees for borrowing more money are another factor, and they add up. Competitors charge $50 every time reverse mortgage customers dip back into the honeypot post-closing. The Bloom Card has no such fee grab.

To get a Bloom Card, you must be in the 55-and-up club, but Bloom’s average customer is 71. Loan amounts are primarily actuarial — and appraisal-based. You get higher approval amounts, the longer you’ve been alive, the more your home is worth and the more marketable your property and location. And, because no payments are required, proof-of-income and credit requirements are minimal compared to applying for a regular mortgage.

“The product widens the appeal of equity release to a broader audience, particularly those without an existing mortgage that they’re