Bloomberg: Financial Advisors Still Not Sold on Reverse Mortgages

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. 

Read the Bloomberg News article.

Written by Elizabeth Ecker

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  • I have a prospect that was paying a firm $7000 a year for them to manage his portfolio but when he asked about setting up a “standby line of credit” that I suggested to him they said OUR closing costs were too much. What? He’s still considering thanks to some wonderful recent info on this product, but I doubt his planner will ever open his eyes long enough to learn about the RM.

    • wealthone,

      A standby line of credit is a very old idea going back to at least the pre-Korean War (or better described as the Truman manipulated police action along the 38th Parallel in eastern Asia) era. Yet that is not what was advocated by Dr. Salter or Harold Evensky. What these two TTU professors promote is the use of a Standby Reverse Mortgage Strategy.

      Unlike a standby line of credit concept alone, the Standby Reverse Mortgage strategy places emphasis on cash flow, replacing cash reserves, growth in the HECM line of credit and debt management HECM (rather than a mere pay down strategy beyond minimum pay down requirements).
      It is a very holistic strategy in light of how a HECM works.

      While you may feel like you are being thrown under the bus, we must learn how to use and master the terms we use in this industry rather than always coming back with “well you know what I meant” or other less than admirable excuses. If you want to stand out to a financial advisor, learn to make her/him stretch to see ideas and concepts he is not used to be hearing. A standby line of credit is an old concept which has far more flaws and difficulties than a standby reverse mortgage strategy. The Standby Reverse Mortgage strategy is one few financial advisors have considered or looked into but one which should intrigue many since they have some understanding of managing a line of credit.

      • While what you say is noted, I would hope you that you properly understood that I meant the standby reverse mortgage strategy. We are in fact on a reverse mortgage message board if I’m not mistaken. If I say LOC or Tenure to you, you know what it means, I don’t have to then follow it up with 2 paragraphs explaining exactly what I meant, do I? Then, there.

  • With a line of crdit growth rate over 4% that could max out as high as 13%… Reverse mortgage could be a great safety net to put into place. I just helped a retired neurosurgeon do just this.. Reverse mortgage is not for every situation. It is a fit for some. Unfortunately a lot of advisors are not willing to become fully educated about the HECM loan..

  • Maybe we should borrow a page from the Pharmaceutical industry play book and encourage ad viewers to “Ask your financial advisor if a reverse mortgage is right for you.”

  • They still don’t get it! I agree that a reverse mortgage is not for everyone. However, the alternatives that Bloomberg brings up is not selling me!

    First off, selling the home for those who want to remain where they are for the rest of their day’s is not a good alternative.

    Second, taking out a home equity loan means payments, for some one who is on a fixed income and needs to lower monthly obligations, this is a bad alternative.

    The third alternative, lower fees with the home equity loan is a fact, however, this will not make the difference with many home owners that recognize the value of the reverse mortgage!

    I feel there are a lot of facts missing in the article, no fault of Elizabeth Ecker but on the part of Bloomberg and Lundgren. There reasons carry no water as far as I am concerned!!

    John A. Smaldone

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