An NBC affiliate recently produced a segment discussing the pros and cons of reverse mortgages.
“You’ve probably seen the commercials or ads online promising to turn your home into cash without having to sell the property, move out of it, or repay a loan every month,” the WSFA.com segment begins. “They’re advertising reverse mortgages and more and more senior citizens are taking advantage of them. What those people may not realize is that reverse mortgages come with potentially serious risks.”
Pros include getting to keep and remain in the home, and easier qualifications for seniors versus a traditional mortgage, it says, while cons include ongoing responsibility for taxes and insurance, home repairs, mortgage insurance, and origination fees.
In many cases, a reverse mortgage is the answer to what a borrower might need to make ends meet, the news segment acknowledges, going on to cite financial advisors’ warnings to fully understand how the loan works.
NBC highlights what it calls a reverse mortgage success story—the case of Hilda Funk, a widow in her early 80s who struggled to make loan payments on her mortgage following her husband’s passing. Funk was afraid she’d lose her home and initially considered taking out a second mortgage before learning about getting a reverse mortgage.
“This is the answer to what we needed so we can stay in our house,” she told the NBC affiliate, calling the reverse mortgage a ‘blessing.’ “I can stay in it as long as I’m here, which is a very big relief for me.”
However, whether or not a reverse mortgage is the correct financial option varies by situation, the segment notes.
“The only way you can determine that is by your specific needs and your specific situation,” Bill Hawkins, the associate director for Alabama’s AARP chapter, told NBC, recommending that people “get expert advice.”
A financial advisor quoted in the segment believes reverse mortgages are “never the right answer,” instead recommending exploring other options, including selling the home.
Written by Alyssa Gerace