The Street: Reverse Mortgages Make Sense for Retirement

When comparing the amount of home equity Americans hold with the amount of retirement savings they have saved up, the numbers are actually closer than some people may think.

There was more than $13 trillion floating around in home equity in the first quarter of 2016 and just over $14 trillion in retirement savings, so considering using home equity to fund retirement may not be as disadvantageous as some people once thought, explains a recent article from The Street.

Borrowing against home equity can actually make a lot of sense for retirees because of the current low interest rates and an appreciating housing market, the article points out.

Advertisement

Though, the people who would actually tap into their home equity to help fund retirement are fewer than one in six, according to the article. A lack of awareness among the public is another reason for home equity’s low utilization.

“I’d suspect that many people don’t think about putting money into their home for purposes of retirement,” said Matt Sadowsky, director of retirement and annuities for TD Ameritrade in the article. “But that doesn’t mean it can’t be used for retirement and an income generating tool.”

An option for tapping into home equity that is brought up is a Home Equity Conversion Mortgage (HECM) for those homeowners who are 62 and older.

Consumers generally still have a poor understanding of reverse mortgages, the article pointed out, but there is also a large number of retirees who prefer to leave their financial legacy to their heirs, which deters them from utilizing their home equity.

However, one fact that the public isn’t largely aware of is the “friendly” tax code when using equity in a primary residence as an asset to be sold after retirement.

“If it’s your primary residence, the first $250,000 of gains is not taxed, and if you’re married, it goes up to $500,000,” Sadowsky said in the article. “That’s a very important benefit that most other investments don’t have.”

Read the full article at The Street.

Written by Alana Stramowski

Join the Conversation (2)

see all

This is a professional community. Please use discretion when posting a comment.

  • Another case of a writer not checking their facts.

    He writes: “Borrowers can live in their homes long as they wish payment-free, while
    using the loan proceeds for any purpose. When the borrower dies, the
    lender gets the title.”

    It is the lack of fact checking by media who publishes this information that holds back acceptance of HECM’s as a main stream financial solution.

  • The article is right on. If one reads the article right, it points out that we have a lot of opportunity out there to educate senior homeowners and people in general. We can get business from by doing this the same time. Not a bad deal, is it?

    Seniors and people in general still do not really understand what the reverse mortgage is all about! I run into this daily, hard to believe after all these years since 1989 but it is a fact. We have a big responsibility to help and educate an awful lot of our senior homeowner citizen’s, lets do all do it together!

    In closing, I am a bit confused about one statement? I don’t know where the following statement fits into the article, which stated:

    “However, one fact that the public isn’t largely aware of is the “friendly” tax code when using equity in a primary residence as an asset to be sold after retirement. If it’s your primary residence, the first $250,000 of gains is not taxed, and if you’re married, it goes up to $500,000,” .

    I wish most seniors that took out a reverse mortgage that lived long enough to sell their home had that much equity left to worry about the so called friendly tax code!!

    John A. Smaldone
    http://www.hanover-financial.com

string(99) "https://reversemortgagedaily.com/2016/07/25/the-street-reverse-mortgages-make-sense-for-retirement/"

Share your opinion