Reverse mortgages may be more appealing to seniors now that the Home Equity Conversion Mortgage (HECM) program has made a number of changes to the product. But there are still many senior homeowners who are scared of making a mistake with their home equity or being taken advantage of by unethical loan providers, according to a recent article published by The Huffington Post.
To combat these fears, homeowners should embrace a three-step strategy to determine if a reverse mortgage is right for them, explains Jack Guttentag, professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, in the article.
Step one, he writes, is for homeowners to identify their financial needs that could possibly be met by a HECM. Depending on which group a senior homeowner may fall into will determine how a reverse mortgage may be the most useful for their specific situation.
“I have found that they [seniors] fall into five groups that have different financial objective,” he says in the article. “Each of these groups requires different information to make a good decision.”
Step two is to determine whether the amounts you can draw with a HECM immediately or in the future justify the decline in home equity, while the third step for the homeowner is to narrow the selection by comparing different lenders.
“The important points are, first, that no matter what financial category a senior falls into, a decision to take a HECM reverse mortgage or not should be data-based and include information about what is likely to happen in the future,” Guttentag says in the article.
Read the full article on The Huffington Post.
Written by Alana Stramowski