Highlighting the most recent series of program changes to reverse mortgages over the past year, TIME Money says these “once-suspect” loans can now be a useful retirement tool.
In another instance of positive press for the reverse mortgage industry, the TIME article echoes much of the same praise and recognition Home Equity Conversion Mortgages have garnered from the mainstream media as a result of the Financial Assessment, non-borrowing spouse protections and acceptance among financial planners.
“There’s a totally different way of thinking about these [reverse mortgages] now,” said John Salter, professor of personal financial planning at Texas Tech University.
Salter, who has published extensive research on how reverse mortgages can function as a risk management tool for retirement distributions, emphasizes the line of credit’s ability to be used as a potential safety net.
“Maybe you’ll never use it [credit line], but if you have a financial shock or health care crisis, it’s there,” he said in the article.
TIME also notes that while reverse mortgages are often considered more expensive than traditional mortgages or home equity lines of credit, the costs have dropped over the years.
“In 2013, the initial issuance premium was cut to 0.5% of a home’s value, down from 2.5%, provided you limit your borrowing in year one,” TIME Money’s Donna Rosato writes. “That’s a saving of $6,000 on a $300,000 home.”
But while other rule changes have made reverse mortgages safer even for borrower’s families, namely policy updates permitting surviving non-borrowing spouses to remain in their home, TIME the article with a word of caution regarding the importance of paying property taxes and other mandatory obligations.
“If you fail to pay property taxes or home insurance, you can still lose your home,” Rosato writes. “So, if you’re already stretched financially, downsizing might be a better option…”
Read the TIME Money article.
Written by Jason Oliva