Despite recent reverse mortgage changes that serve to better protect borrowers, the loans still come with some pitfalls, writes the L.A. Times in a recent article.
Outlining the case of one Southern California reverse mortgage borrower, the L.A. Times column notes several potential “pitfalls” of home equity conversion mortgages including the insurance premiums, uncertainty of adjustable rate loans, and potential lack of inheritance for heirs who are expecting to inherit their parents’ homes.
“If somebody wants to leave their home to their heirs, they probably don’t want a reverse mortgage,” Philip Goss, a certified reverse mortgage professional in Glendora, Calif. tells the Times columnist. “They’ll be using up equity in the home.”
However, the column continues, if next of kin can take care of themselves and the homeowner plans to remain in the home for some time, “a reverse mortgage can be an effective way of turning the roof over your head into cash in your pocket.”
The article does not detail recent product changes designed to ensure the borrower will be able to meet his or her loan obligations, but it does detail some concerns including high upfront costs, variable interest rates, and insurance premiums. [The column does not differentiate between the different insurance premium options that are available to borrowers, depending on the type of loan they take.]
“A reverse mortgage can be a helpful financial tool for some people,” Lori Trawinski, director of banking and finance for the AARP Public Policy Institute, tells the L.A. Times. “But for others, there may be better ways to go.”
Written by Elizabeth Ecker