HuffPost: Are Reverse Mortgages Lucrative Options?

In the latest in a series of reverse mortgage-focused articles published by the Huffington Post, the publication highlights some of the options that the loans present not just for those in need of cash flow, but as a vehicle for those who are well off.

Citing a recent white paper out of the Edinburg University of Pennsylvania, the publication focuses on the use of a reverse mortgage line of credit as a more “lucrative” option than selling investments.

The loan can also offer tax benefits, the article notes, in that it can serve as an alternative to using tax-deferred savings, and thus better positioning the borrower in a more advantageous tax bracket.


“A variety of options exist with a reverse mortgage that are lucrative regardless your income level or financial comfort during retirement,” the article states. “Make sure that you get expert advice on a reverse mortgage and how it relates to your specific financial situation to more easily arrive at a conclusion…For many retirees that have equity in their homes, a reverse mortgage is a solid option during retirement.”

Read the full Huffington Post article.

Written by Elizabeth Ecker

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  • According to Google the definition of lucrative is: “producing a great deal of profit.” So how does the author demonstrate a reverse mortgage produces a great deal of profit?

    The summary above states: “the publication focuses on the use of a reverse mortgage line of credit as a more ‘lucrative’ option than selling investments.” So where is the profit? The only profit comes by selling the investment. Who knows if the profit from selling the investment will increase or decrease when the investment is ultimately sold? As part of that question one should also ask if waiting will result in higher capital gains tax as proposed by former Senator Hilary Clinton. So where is “the great deal of profit” from using reverse mortgage proceeds to delay the sale of the investment?

    The example is nothing more than a form of leveraging. Any time an investment is carried through debt financing, that financing is just a form of leveraging.

    Without cited evidence, the author claims: “Commonly, retirees will use 401(k) funds, or other savings, to pay off a mortgage. But, if there’s enough equity in the home, the reverse mortgage could be used instead of using tax-deferred savings (which can put a retiree in a different tax bracket for the year if too much is withdrawn at once).” There are a couple of questionable things in that quotation. Paying off an existing mortgage with a reverse mortgage still results in an unpaid mortgage while paying it off with distributions from a 401(k) account leaves no mortgage liability. Second how common of a practice is paying off with 401(k) account distributions? It is doubtful if it is a truly common practice.

    So while describing the use of a reverse mortgage as lucrative is novel, it lacks substance and while NRMLA can count it as a positive article, it is not an article which should be considered a recommended read seniors or financial planners.

    (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

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