Buying a new home with a reverse mortgage is an often overlooked strategy by retirees who could potentially benefit from borrowing against their home equity instead of raiding their savings to cover the purchase price with a traditional mortgage, according to a recent article from U.S. News & World Report.
“Experts say the product can work for some people, though not all, arguing it’s a useful option when there are no others, but warning about fees and the costs of paying interest on interest,” the article states.
One of those experts is Tom Holsworth, business development manager for Quontic Bank in Indianapolis, who tells U.S. News that a reverse mortgage may be a “good idea for consumers who are able to pay the taxes on their home and maintain it, as this financial product does not eliminate the responsibility for these expenses.”
Many consumers, and even real estate agents, are unaware of the program or describe reverse mortgages as being useful only for those who cannot get a regular mortgage on their own or with family members as co-signers, said Jeremy Colonna, senior loan originator with Matchpoint Funding, a real estate lender in Los Angeles.
“It’s a relatively small demographic for whom this is a legitimate option,” Colonna says in the article.
But for retirees who want to remain homeowners, but not in their current homes, the article notes that a Home Equity Conversion Mortgage may help ease the financial pain of the purchase.
Read the full U.S. News & World Report article here.
Written by Jason Oliva