Bankrate: Expert Talks Reverse Mortgage Safety, Value of Refinancing

As more seniors continue to try and find new ways to make financial ends meet during the ongoing COVID-19 coronavirus pandemic, some may naturally turn to new types of products or services for them, which can include reverse mortgages. Nevertheless, some seniors still remain apprehensive about the product category, which has spurred online personal finance resource Bankrate to tackle questions related to reverse mortgages.

In touching on a question about whether or not reverse mortgages are “risky” for American retirees, Bankrate chief financial analyst Greg McBride says that the increasing degradation of retirement savings across the country gives him a generally positive view of reverse mortgages.

“I’m a fan of the reverse mortgage product because it will be a lifeline for millions of retirees in the years ahead,” McBride says. “Far too many Americans are under-saved for emergencies and for retirement. Many seniors that have been in their homes for decades could have hundreds of thousands of dollars of home equity but do not have hundreds of thousands of dollars in their 40K or IRA.”


There are multiple potential benefits of a reverse mortgage for retirees, but the most visible and obvious one centers on the elimination of the necessity to make a continuing forward mortgage payment, he says.

“That alone can stretch the life of otherwise modest retirement savings significantly because your monthly expenses are suddenly much lower,” McBride says. “The ability to tap into a lump sum of equity to do needed repairs or modifications in order to age in place can be a game changer.”

Additionally, setting up regular monthly disbursements can help supplement existing retirement income, he says, and a reverse mortgage line of credit can help someone have a source for covering unplanned expenses.

“A lot of the ‘risks’ that are frequently portrayed in the media either have nothing to do with the reverse mortgage or are flat-out incorrect,” he says.

In terms of refinancing an existing reverse mortgage, however, McBride is less convinced because recouping the upfront cost for a reverse mortgage refinance can take longer, he says.

“Since reverse mortgages don’t require monthly payments while the borrower still occupies the home, your motivation for refinancing a reverse mortgage may be different than those refinancing a traditional forward mortgage where reducing the monthly payments is the primary attraction,” he says. “But given the costs involved, you may find that refinancing a reverse mortgage takes longer to recoup the costs than with a forward mortgage, or just isn’t worthwhile.”

Read the article at Bankrate.

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