Forbes: Greater Value in Opening a Reverse Mortgage Before It’s Needed

Opening a reverse mortgage earlier will allow for greater availability of credit in the future, compared with waiting to take out a reverse mortgage until further along in retirement. This is according to a new piece in Forbes by Dr. Wade Pfau, professor of retirement income at the American College of Financial Services and a member of the Funding Longevity Task Force.

While the rule changes governing principal limit factors (PLFs) have negatively affected the possibility for even more growth in the line of credit, Pfau relates data that helps to illustrate that even if growth is mitigated because of the changes, the potential for a positive investment is still present.

“I’ve previously noted that unused lines of credit work for borrowers to the detriment of lenders and the government’s insurance fund,” Pfau says. “Such use of a reverse mortgage still exists today and would be contractually protected for those who initiate reverse mortgages under the current rules.”

Advertisement

Ultimately, though the way the line of credit operates via a reverse mortgage may seem to some like an unintended consequence on the part of the product’s framers, Pfau says it could still lead to a positive outcome for reverse mortgage borrowers.

“Line-of-credit growth may be viewed a bit like an unintended loophole that has been strengthened by our low-interest-rate environment,” Pfau says. “Further limitations on line-of-credit growth could potentially be created someday for newly issued loans. Until then, research points to this growth as a valuable way that reverse mortgages can contribute to a retirement-income plan.”

Read the full article at Forbes.

Companies featured in this article:

,

string(113) "https://reversemortgagedaily.com/2019/01/24/forbes-greater-value-in-opening-a-reverse-mortgage-before-its-needed/"

Share your opinion