Forbes Recommends Shopping Around for Reverse Mortgages

In a wide-ranging dive into the pros and cons of taking out reverse mortgages, Forbes this week advised consumers to shop around.

“Ideally, you’ll want to get at least three quotes,” financial planner and Forbes contributor David Rae wrote. “Make sure each proposed reverse mortgage shows a selection of margins and also illustrates how your choices affect the upfront cost and net payouts.”

Rae introduces reverse mortgages as a potential solution for the retirement stresses facing the baby boom generation, including underfunded savings accounts and a lack of defined benefit pension plans.


“Many didn’t save enough during their working years because they planned to sell their homes and live off the equity by moving to more affordable locales,” Rae wrote. “The problem is that two-thirds of the average retiree’s net worth is in the form of home equity at a time when more are wanting to retire at home rather than selling and moving to Florida, Arizona, or other warm climates.”

After a description of how the program works, Rae lays out the upsides and downsides. Positives include the tax-free nature of Home Equity Conversion Mortgage proceeds, as well as the fact that the additional cash won’t affect lower-income borrowers’ Medicaid status.

The upfront costs, meanwhile, represent a potential issue for Rae — who recommends that homeowners only pursue a HECM if they plan to remain in their homes for a significant amount of time in order to justify the expenses — as well as the danger of a senior spending down all of his or her lump-sum draw.

Forbes contributors frequently weigh in on the costs and benefits of reverse mortgages for seniors, with varying opinions. In the last year, for instance, the financial news site has hosted HECM proponent and taxation professor Jamie Hopkins’s take on the HECM for Purchase program, as well as an exploration of how reverse mortgages can help retirees weather income “shocks.

Despite his generally balanced portrayal of the loans as options for some seniors, Rae concludes with a warning note, citing a real estate attorney acquaintance who generally advises against reverse mortgages for most borrowers.

“Reverse mortgages are sometimes marketed as a solution to all of a senior’s money problems. They also may sound like a way to more fully enjoy retirement,” Rae wrote. “However, they can be complicated and hard to understand.”

Check out Rae’s full look at reverse mortgages over at Forbes.

Written by Alex Spanko

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  • Setting aside the unnecessary anecdotal negative and unsubstantiated comment from a single attorney at the end, the Forbes piece is one of the better I have seen in the mainstream media.

    I would, however, have to take issue with the following from the article:
    “Assuming a five-percent interest rate, a 62-year-old borrower could potentially qualify for an initial payout of about 52% of the home’s value.” The PLF at age 62 and 5% is .41 following the October 2, 2017 reductions.

  • In reading this article it reminds me of what many senior clients have told me in the past, which is:

    The cheapest is not always the bestest! What these clients meant is that many of them discovered a major lack of service, not receiving the right answers on their questions from their Loan officers plus they wound up not trusting them!

    Sure, every senior deserves the best prices and rates they can get, but ,service, being able to trust your loan officer to give you the right information and follow through can’t be substituted for anything!

    If the senior client feels comfortable with their loan officer and company. If they have the full trust and faith in him or her and, the rates and fees are close in line with others, than go with with him or her all the way!

    I agree with some of what David Rae has stated but not all! For an example, I do agree to a point with David about the upfront costs!

    David recommends that homeowners only pursue a HECM if they plan to remain in their homes for a significant amount of time in order to justify the expenses, as well as the danger of a senior spending down all of his or
    her lump-sum draw.

    There are times an emergency arises where a reverse mortgage needs to be taken out, even though the senior clients may plan to re-locate, down-size or up-size soon in their present property.

    This was an interesting article but I could not agree with it in its entirety!

    John A. Smaldone

  • Articles like this are great but where is demand?

    I have been in the industry for over 14 years and cannot remember volume this low and seeming to continue at these low volumes for some time to come.

    When an industry stat leader puts out his neck and tells us it looks like endorsement volume has bottomed out only to see monthly volume drop by over 15% in less than 4 weeks begs the question, how long will this situation go on?

    How many more months of less than 3,000 endorsements are yet ahead of us this calendar year? At least one source is talking about a minimum of 2 if not 3 more months including August.

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