Chicago Tribune: For Some, Reverse Mortgages Too Good to be True

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.

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…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

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  • Sometimes it is hard to know what writers mean when they use the term equity.  A 30% drop would seem to be the drop in home value not equity.  For example, a home valued at $400,000 has encumbrances of $100,000 so that equity of $300,000.  If the 30% is based on equity then the current value of the home would be $310,000 and equity $210,000 but if it is on value, the current home would be $280,000 and equity $180,000.

    It is my understanding the 30% drop was in home value, not equity.

  • It is very tough to get mortgage refinance these days especially major banks. It is not a secret every one knows, what is the solution? Check our your local guys or check online for 123 Refinance they should be able to find a solution for you.

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