Online publication Registered Rep touted the use of reverse mortgages in retirement in a column published this week.
The publication, which serves investment advisors and other financial planning professionals, states in a column by Mark Miller that while reverse mortgages were not always considered a viable retirement option, they are worth considering today.
While downsizing is the best way to tap home equity, the article, titled “Five Ways to Change Your Clients’ Retirement Math,” states, reverse mortgages offer a second option “—with caveats.”
“I’m not a fan of adding debt in retirement, and traditional reverse loans carry heavy fees. But a relatively new lower-cost option introduced last year could make sense in some cases,” Miller writes. “The Saver HECM (Home Equity Conversion Mortgage) is administered by the federal government, just like a standard reverse loan. But the amount that can be borrowed is smaller, and Saver HECMs can be used as a flexible line of credit. Saver HECMs also have far lower costs: an upfront premium of only 0.01% of the property’s value, or HUD’s loan limit, whichever is less, versus the standard loan’s 2%.
The article cites recent the views of some planning experts, including Harold Evensky of Evensky & Katz Wealth Management as seeing reverse mortgages as a way for some clients with short-term cash shortfalls to avoid selling other investments in the interim. Others have suggested using the HECM Saver as a way to delay filing early for Social Security, the article says.
Read the original article.
Written by Elizabeth Ecker