Reverse mortgages may have developed a bad reputation throughout the years, but financial planners are beginning to change their tune, according to an article by consumer financial services company Bankrate.
“Years past, financial planners didn’t view reverse mortgages as a planning tool,” said David Johnson, associate professor of finance at the University of Wisconsin-Superior. “It was viewed as a last resort and they assumed that the only people that do reverse mortgages are people that are desperate. Clearly that’s not the case, and I think they are starting to view it differently now.”
Many older homeowners see the advantages of using a reverse mortgage to pay off their traditional mortgage or to keep as a safety net in case they have a medical emergency in the future, Bankrate reports.
“Maybe they don’t need the money right now, but down the line they might have a medical emergency, so it’s good for them to have the option,” said Beth Paterson, executive vice president of the Reverse Mortgages SIDAC in St. Paul, Minn.
Previously, a report on reverse mortgages in the Journal of Financial Planning suggested that early establishment of the home equity conversion mortgage (HECM) line of credit, as opposed to prolonging it as a last resort, is beneficial to retirement portfolio survival.
“A reverse mortgage is not the solution for everybody, but clearly it’s an option for many people,” Johnson said in the Bankrate article.
Read the full article here.
Written by Emily Study