Are reverse mortgages like 3-D printers? A Morningstar article this week draws the comparison, going into detail about the history of reverse mortgages as well as recent changes.
“They can do some interesting and useful things, but they are complex and can be expensive,” writes author John Wasik.
The article delves into the topic citing perspective from Tom Davison, an Ohio-based former financial planner with knowledge of reverse mortgages.
“One of the biggest risks in retirement is paying for expensive in-home care,” Davison tells Morningstar. “An RM line of credit is a good standby if you have big health-related expenses.”
Wasik details the costs involved, as well as the benefits—being able to pay for the in-home care noted by Davison, and serving as a standby line of credit for those who are well off. He also notes the drawbacks—though they will never owe more than the home is worth, it can make leaving a home to heirs more complicated when there’s a reverse mortgage in place, he says. The costs are also considerable depending on the borrower’s age and circumstances, he says.
“Because reverse mortgages are complex products that will trigger financial consequences down the road, you need to talk with a loan counselor, certified public accountant, or other qualified financial professional before you forge ahead,” the article concludes.
Written by Elizabeth Ecker