A borrower who is considering obtaining a reverse mortgage loan should consider certain scenarios about the timing and circumstances of his choice to engage in such a loan, as well as all the details of his financial situation. This is one of the ideas shared in a recent column by US News & World Report, with the goal of determining when a reverse mortgage is a good or bad idea for a particular senior.
After describing the basics of a Federal Housing Administration (HECM) mortgage as well as some property options, the column then goes into detail including reverse mortgage costs for borrowers, as well as the various uses and exchange options that exist.
The column then goes into arguments regarding when it would be a good or bad idea to proceed with a reverse mortgage, focusing on individual circumstances. For example, it would be a good idea to consider a reverse mortgage for those who want to stay at home; who wish to preserve their property; And for anyone planning their future while staying at home.
The column reads “You may spread the closing fee over a longer period of time and also rely on payments from the HECM to pay current and/or emergency expenses.” “HECM can also help you pay for renovations to modify your home for aging in place.”
In terms of “preserving your assets,” this is due to avoiding the risk-return cascade, the column explains.
“If you have other non-home assets — such as an investment portfolio — funds from HECM can cover day-to-day costs while investments remain the same and can grow,” it reads. For those planning ahead, a reverse mortgage may be more reliable than other options.
The column reads “Don’t look at HECM as a last resort – it can be a ready source of credit that you get at 62 and don’t use until you really need it years later.” “Unlike some other sources of financing, such as a home equity line of credit, HECM will always be there.”
In cases where a reverse mortgage might be a bad idea, the column outlines three additional scenarios: If you’re moving soon, getting a reverse mortgage would be a bad option because the loan will become due and payable as soon as you leave the house with a HECM lien. A reverse mortgage can also be a bad idea for anyone who is not equipped to manage money, and for those who have not planned to use the loan proceeds effectively.
Read the column in US News & World Report, which also includes data from RMD 2021 Chnagemaker Shelley Giordano and Dr. Wade Pfau.