While a reverse mortgage can convert a home into a piggy bank, it’s not appropriate for every situation.
One such situation was addressed in a recent Fox Business “Ask the Experts” column in which certified financial planner Don Taylor suggests against using a reverse mortgage.
The reader, a 62-year-old retired divorcee, is living with her mother, daughter and grandson in her mother’s house, supporting her family on Social Security benefits. Although her mother has nearly $500,000 in investments, the reader has no other retirement savings and is hoping to convert her mother’s home equity into cash flow.
But Taylor suggests against using a reverse mortgage to do so — at least until after she and her sister inherit the home.
“Treating her home like a piggy bank by taking out a reverse mortgage when she has half a million dollars in investments, a pension and Social Security benefits is pretty shortsighted,” he says.
Instead, wait until after the home is passed on in an inheritance before taking out a reverse mortgage.
“A reverse mortgage will diminish the equity that two sisters have in the home when you inherit,” he says. “You may have more financial flexibility in taking on a reverse mortgage after you inherit, using the proceeds to buy out your sister’s half of the home.”
Read the full column here.
Written by Emily Study