U.S. News: Why Home-Buying Retirees Overlook Reverse Mortgages

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.”

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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

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  • Someone need to reach out to the US News (Jeff Brown) and let him know he is 3 years late on this paragraph: “But with the HECM, there is no income requirement or credit check. Generally, borrowers get fixed-rate loans and can choose between the standard deal described in the example or a “saver” version that provides a smaller loan and lower interest rate.”

  • I strongly disagree! What about the senior’s that are wanting to down size, have only a certain amount of funds for a down payment and want to reduce their overall monthly expenses?

    The H4P program could be a way that our senior’s can own a downsized home, not have a mortgage payment and achieve their goal. With a reverse mortgage, they can meet there budget monthly financial responsibilities with the income they have coming in!

    It is not true that a reverse mortgage is only useful for those who cannot get a regular mortgage on their own or with family members as co-signers. This is a complete misstated fact!

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

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