Is a reverse mortgage a good retirement strategy? Yes — well, for some people.
“Reverse mortgages have their place, but the problem is that they’re sold to people who shouldn’t have them because it doesn’t work for them,” Craig Smalley, a financial adviser and certified estate planner, tells MarketWatch in a recent column. “They are for those that have little or no retirement funds, and have no heirs really to speak of.”
The home equity loan has become a popular way for baby boomers to fund their retirement, as $15.3 billion in reverse mortgages were taken out in 2013, an increase of 20% over 2012, writes Cliff Goldstein, a member of the personal finance team at NerdWallet, a personal finance website.
Being able to convert home equity into cash without selling the home, no monthly payments, and no steep income or credit requirements are among the benefits of a reverse mortgage.
However, Goldstein notes that there are also drawbacks, including high fees and property taxes, insurance and maintenance expenses.
“Be sure to consider all of your options before making a decision,” he writes.
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Written by Emily Study