Reverse mortgages are not for the uninformed, says a Chicago Tribune article published this week by Tribune columnist Jill Schlesinger.
The column writes:
“During the real estate boom, I encountered a lot of people who thought they would use their home equity to fund everything from big splurges, to college tuition, to retirement. When the bubble burst, many were forced to spend savings and cash in investments and now face retirement with home equity that is on average 30 percent lower than it was at the peak. For some of these near or current retirees, the allure of a reverse mortgage is calling.
…In essence, a reverse mortgage can help retirees convert an illiquid asset — a house — into a liquid one that can help supplement retirement income. Sounds too good to be true, right? For some, it is. One big downside to reverse mortgages is that younger retirees who use them may run out of money and options at too young an age. These folks may have been better off selling their homes and using the equity to purchase another home or renting. Additionally, it may make sense to spend other assets before extracting home equity via a reverse mortgage.”
Ultimately, the reverse mortgage can be a valuable tool, but it requires research upfront and education about the product, Schlesinger writes.
View the original article.
Written by Elizabeth Ecker