While reverse mortgages offer a number of positive benefits — namely, extra retirement income and no monthly mortgage payment — borrowers should be wary that taking out the loan spends down what’s likely their largest asset, experts say.
In a Time magazine “Ask the Expert” column, one reader says he and his wife have a home worth $700,000, which is nearly paid off, and no heirs. With this in mind, he asked whether getting a reverse mortgage would be a good idea.
“Even though you don’t have heirs to leave the house to, you might need it later to help pay for assisted living or extended home health care,” said Sandy Jolley, a reverse mortgage suitability and abuse consultant in Los Angeles. “And you cannot take out another home equity loan once you have a reverse mortgage.”
Unlike others who advocate reverse mortgages should be used sooner rather than later, Jolley suggested the loan should be used as a last resort.
Instead, consult a trusted family member or a financial planner who’s not in the business of selling reverse mortgages about whether you really will need that money in order to live comfortably in retirement, she said.
“The combination of Social Security and your retirement savings … may provide the income you need to live the way you want to live. Save your equity until you really need it,” Jolley said.
To read the full column, click here.
Written by Emily Study