Long considered a loan of last resort, reverse mortgages now have their place in financial planning for even the mass affluent, a cohort of 10 million to 15 million baby boomers who have between $750,000 and $2 million of net worth at retirement, according to an article by The Huffington Post.
These homeowners, who could have homes valued at up to $1 million, are likely to see the most reverse mortgage benefits, experts say.
“That’s because it doesn’t take into account the volatility of the securities portfolio of the 401(k) account or the IRA,” the HuffPost writes, noting that drawing from securities portfolios when the market is down can exhaust a person’s retirement funds.
AAG has seen a growing number of wealthier people enjoying the benefits of a reverse mortgage, because they want access to a line of credit in their homes, Paul Fiore, executive vice president, said.
One way the cohort can access that home equity is through a jumbo reverse mortgage, a product that specifically targets affluent Americans with high-value homes by giving them the opportunity to tap into more of their home equity. While the market for the jumbo product is near absent, there remains a huge need for more jumbo loans, especially as reverse mortgages gain a wider acceptance among those outside the industry.
“This is not just for the destitute, which is what the perception was for quite a long time,” Fiore told The HuffPost. “That’s when you will start to see the volume increase because people will look at it as a legitimate tool for retirement.”
A shift in reputation has also led to reverse mortgages becoming a bigger part of the financial planning conversation, with advisors embracing the product as a way to hedge against future costs and plan ahead.
“The financial planning community has really adopted the product in a positive way,” Fiore said.
Read the full Huffington Post article here.
Written by Emily Study