Reverse mortgage benefits can span a wide population of older Americans spanning both those trying to keep their homes, as well as “well-heeled retirees” seeking an investment buffer, the Wall Street Journal writes in an article this week.
With the print headline “Reverse Mortgage Rethink,” the WSJ delves into academic research on the Home Equity Conversion Mortgage Saver led by John Salter and Harold Evensky at Texas Tech that has effectively positioned the Saver loan as a safeguard against losses across other investments in a retiree’s portfolio.
“Retirement is really about cash flow,” Martin James, a certified public accountant in Mooresville, Ind., told the WSJ. “Even for a person who’s got their mortgage paid off, it’s nice to have a line of credit sitting there.”
No longer a loan of last resort, the article writes, financial planners today are taking a different approach to reverse mortgages, though there are changes in store expected later this year, following congressional approval of the Department of Housing and Urban Development toward altering the HECM program.
Citing the use of a reverse mortgage as a way to eliminate mortgage payments, save on withdrawing from retirement investments that are subject to tax and serving as a “bridge” to withdrawing on Social Security, the article includes two pieces of advice for those who are considering taking out a reverse mortgage: consult an expert and keep kids in the loop—especially because children of reverse mortgage borrowers are often at first uncertain of the idea.
“My first answer, when people ask how to approach the kids, is to ask them if they have an extra room in their house for their parents,” Salter told the WSJ.
Written by Elizabeth Ecker