Mainstream news coverage of reverse mortgages has ticked up recently, with many pointing to a shift in the old way of thinking about reverse mortgages as last-ditch options. But Bloomberg News this week writes that financial planners are still not recommending them to clients, namely because homeowners have other, less costly options.
Citing the experience of one financial advisor whose mother used a reverse mortgage to live out her later years in her home, Bloomberg writes that the same advisor would not recommend a reverse mortgage to his clients.
“A reverse mortgage worked for Art Lundgren’s mother,” Bloomberg writes. “Widowed at age 50, she never had a chance to save much for retirement. To lower expenses, she moved from the four-bedroom home where she raised three kids to a two-bedroom house. She loved the garden and the neighbors and never wanted to move again.”
Yet the potential downside is realized in the loan’s costs, and alternatives, the article continues.
“It was the right decision for his mother, says Lundgren. But as a financial planner at Lake Country Financial Planning outside Minneapolis, he considers himself lucky that he’s never had to put a client in a reverse mortgage. … Too often, reverse mortgages put people in irreversible situations.”
Bloomberg notes the alternative of selling the home in order to downsize, or taking out a home equity loan, which comes with lower fees and increasing availability in the current market.
Written by Elizabeth Ecker