Kiplinger’s Explores Uses of the ‘Versatile’ Reverse Mortgage

Kiplinger’s Personal Finance took a deep dive into the potential uses of Home Equity Conversion Mortgages in its upcoming October issue, eventually deeming the product “a versatile solution” for cash-poor, equity-rich seniors.

“It lets you stay put, ditch your mortgage payment (if you still have one), and tap your home equity,” Kiplinger’s associate editor Pat Mertz Esswein wrote.

The piece acknowledges the reverse mortgage’s reputation as “loans of last resort,” but mentions the product improvements implemented over the last few years and scholarly research into their utility outside of emergency cash. For instance, Kiplinger’s spoke with an Arizona couple that took out a reverse mortgage this year instead of a traditional “forward” home equity line of credit, eventually establishing a HECM line of credit worth $172,000 on a home valued at $280,000.

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“We don’t really need the reverse mortgage financially,” borrower Bill Deller told Kiplinger’s. “But it makes us feel more comfortable that if we need it, we’ve got it.”

The piece does suffer from some unfortunate timing. Despite bearing a publication date of October, it includes soon-to-be outdated information about principal limits, noting that a borrower can get 52% of the home’s value at age 62; starting October 1, that number will drop to 41% under the Department of Housing and Urban Development’s new lower principal limit structure.

Borrower resources

After deeming the HECM credit line “the most flexible option” and explaining some common strategies for using the line in retirement, Kiplinger’s walks through the other draw options and potential pitfalls. Readers are advised to always get three quotes and avoid lenders that charge maximum origination fees, while also using online resources such as the Mortgage Professor and the National Reverse Mortgage Lenders Association’s online database of certified professionals.

The piece additionally explains interest rates, borrower obligations, the end-of-loan process, and a variety of other issues that seniors may consider before taking out a HECM.

Check out the full piece at Kiplinger’s.

Written by Alex Spanko

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  • Not a bad article, it does some new found justice to the HECM, especially where the changes over the past few years have made our product a much more versatile product.

    As far as advising readers to always get 3 quotes, I don’t neccasarily feel that was right to make that kind of statement!

    naturally the borrower wants to get the most favorable transaction they can get, however, TRUST is an imortant factor that is part of the equation!

    Price is not the and should not be the deciding factor. The senior borrower needs to have the comfort of complete trust in the LO and company they are doing business with. The borrower must feel that the information and direction the LO is guiding them in is right and correct.

    Trust is such an important part of who a borrower should decide going with.

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

  • Ed,

    In California, the largest state for HECMs even on a percentage of seniors with HECMs basis, we do not need attorneys. We use escrow companies which are supposed to be neutral. Otherwise your depiction is reasonably accurate.

    Yet why would a loan officer volunteer that they are under a general standard of duty? Some lie and say they will act with the prospects’ best interests in view without specific written instructions from their lender to that effect. Some try to lie to themselves by calling borrowers “clients” rather than sales customers. There is no client relationship between a loan officer and a borrower.

    So your observations are well stated. Trust in the Loan Officer is by and large misplaced. But so called financial advisers should not be trusted unless they have a legal or contractual responsibility to provide services using a fiduciary standard. RIAs, attorneys, CFPs, and generally CPAs must provide services using a fiduciary standard. That is why attorneys, for example, must proactively inquire if a potential client has any potential conflicts with their current client base.

    These are the black and white standards there is minimal gray areas but you almost need to be an attorney to find them.

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