A reverse mortgage is a complex financial product that may be able to work for particular seniors looking for additional options to bolster cash flow in retirement, however whether or not a senior should get such a loan can be a complex matter that should be consulted with a financial advisor.
This is according to a column published this week at Yahoo Finance. While the reverse mortgage industry has been appealing to the community of financial advisors for years as referral partners and as educational resources, the appearance of that same recommendation in a publication designed for the general public may be an encouraging sign for reverse mortgage industry participants.
“A reverse mortgage is a financial instrument that allows seniors who are 62 and older to borrow against the value of their homes,” the column reads. “Maybe their family home has been where they raised their children, but they are now empty-nesters and it’s far too big. If the seniors have a lot of equity built up in their homes, they can tap their equity to help with their cash flow. Getting a reverse mortgage is one way to do that. […] A financial advisor can help you weigh the pros and cons of a reverse mortgage.”
While the column generally has a cautionary tone, it also lays out that several different reverse mortgage options are available to seniors 62 or older. A Home Equity Conversion Mortgage (HECM) sponsored by the Federal Housing Administration (FHA) is described as “the most popular reverse mortgage loan,” and details some of the processes involved for anyone who seeks such a loan out.
The column also makes mention of the seldom-used “single-purpose revere mortgage,” but also makes mention of the existence of proprietary reverse mortgages for homes beyond the FHA lending limit.
“A proprietary reverse mortgage is used when a borrower’s income is at the other end of the spectrum from those who apply for single-purpose reverse mortgage loans,” it reads. “Proprietary reverse mortgages are obtained through private lenders and are not federally insured. They are for high-net-worth individuals with a home worth more than $822,375.”
Leaning into a cautionary tone, the column makes mention of a Federal Bureau of Investigation (FBI) bulletin issued this past summer which warned of potential “reverse mortgage frauds,” but also presents a reverse mortgage as a potential option for seniors aiming to explore alternatives to traditional lending.
“Reverse mortgages let people over the age of 62 withdraw equity from their homes to help meet expenses,” the column reads. “There are several types of reverse mortgages, some of which are not federally insured. Before getting a reverse mortgage you should understand all costs entailed in such a move and be alert to scams that seek to take advantage of elderly homeowners.”
Read the column at Yahoo Finance.
