“No one wants grandma to suffer in her sunset years. So what if Johnnie gets a little less inheritance?” asks an AOL Housing Watch article on reverse mortgages.
While there is very little in the article that a reverse mortgage loan officer might not know, the article generated plenty of comments from the AOL community (over 200 at press time).
It cites the case of Robert and Betty Ann Baker, from Hillsborough, NJ, who took out a $100,000 reverse mortgage in September on their $350,000 home. Mr. Baker calls the reverse mortgage a “safety net” that allowed he and his wife to spend on home renovations, travel, and bills without sacrificing their standard of living. Mr. Baker notes that he expects his heirs to be able to pay off the outstanding balance and still have money left over for themselves once the economy improves and housing prices increase.
While Mr. Baker appears to have been happy with his reverse mortgage, the article notes that critics see reverse mortgages as “a tool that allows lenders and borrowers to scam grannies of their home equity.” It notes the high cost of the loan, which comes out of the home equity itself rather than the borrower’s pocket, “sucking money out like a vacuum…. It’s no way to treat a grannie.”
Responds NRMLA President Peter Bell, “Reverse mortgages are about a homeowner monetizing equity…In a lot of cases, this is the largest portion of people’s lives and they are now living cash-restrained lives.Why should the money sit there idle when it can produce a revenue stream to help them meet their financial needs? The naysayers are obviously not facing any financial restraints or they would look at it differently."
Written by Reva Minkoff