A financial columnist this week detailed the ways in which his opinion has evolved on reverse mortgages, moving from mild distrust to solid acceptance in certain scenarios.
Writing for the San Antonio Express-News, columnist Michael Taylor noted that before digging into the products in response to a reader question, he hadn’t known much about them but still remained cautious.
“I had never paid much attention to reverse mortgages, although I’d previously had a vaguely negative feeling about them,” Taylor noted.
But that changed when he started researching Home Equity Conversion Mortgages on behalf of a reader who saw an American Advisors Group commercial with Tom Selleck and wanted some more unbiased information. Taylor walked away impressed with the fact that borrowers don’t have to pay any principal or interest during their lifetimes, as well as the fact that lenders can’t foreclose as long as the homeowner remains current on the tax and insurance payments.
“It’s a bank loan backed by collateral, but the bank can’t take the collateral for the life of the borrowers,” he wrote. “This is also something I’ve never seen before.”
Taylor still offers words of caution, writing that the loans can appear complicated to the average borrower — though the fact that Department of Housing and Urban Development-approved counseling is required helped to assuage those fears. He also wrote about how it was hard for him to get over the somewhat counter-intuitive nature of the reverse mortgage system, as it goes against the traditional narrative of spending a lifetime building equity in a home that then represents your earned wealth.
But he concludes by realizing that he and his wife are both against leaving inheritances for their children as a matter of principle, and that they’d both be open to considering a HECM in the future if they eventually elect to age in place.
“Since we don’t intend to bequeath our house to our girls, I shouldn’t be opposed to draining the house of our home equity once we hit our 70s and 80s,” he wrote. “At that age, the goal shouldn’t be to continuously build up assets (for what? for whom?) but rather to spend money to make our lives better.”
Check out the full column at the San Antonio Express-News.
Written by Alex Spanko