Commonly perceived as scams or loans of last resort for the financially needy in the past, reverse mortgages have the potential to become popular tools to help Baby Boomers face one of their biggest challenges yet: retirement.
A number of factors have increased the appeal of reverse mortgages in financial planning today, including the various studies laboring on the points that many Americans have either not saved enough for their retirements, hold few assets, but maintain high stores of wealth tied-up in their homes.
Mix those ingredients with the desires of many Americans who want to age in place for as long as humanly possible and there is tremendous opportunity for reverse mortgages to fit into the retirement equation.
“Reverse mortgages are becoming more popular, as Baby Boomers retire,” said Jamie Hopkins, associate of professor of taxation at The American College in Bryn Mawr, Pa., in a recent article with The Street. “In the next two to three years you will see a tremendous amount more. A lot of our wealth is built into home equity. This will be a saving grace for a lot of Baby Boomers.”
Hopkins has explored the importance of reverse mortgages in modern day retirement planning, and why retirees need to take a second look at these products that have often been the subject of negative press and misperception.
The policies that were the subject of that negative press have all been fixed, further strengthening the Home Equity Conversion Mortgage (HECM) product for borrowers, their non-borrowing spouses, as well as the Federal Housing Administration, which insures most of the reverse mortgages on the market today.
“The takeaway: once scorned as predatory ripoffs, revamped reverse mortgages just may make sense for seniors whose homes are paid off (or close to it) and whose lives would be a lot more enjoyable with a steady stream of money going into their pockets from that house,” The Street writes.
While reverse mortgages are not for everyone, they now deserve a place in retirement financial planning, added Hopkins.
Read The Street article.
Written by Jason Oliva