A reverse mortgage loan may be worthy of consideration for retirees who find themselves in certain situations, but should also be weighed against the potential upsides and downsides based on a senior’s current situation. This is according to a column published this week at The Motley Fool.
“There are certain requirements you’ll need to meet to qualify for a reverse mortgage, like being at least 62 years old and applying for a home that’s used as your primary residence,” the column reads. “You’ll also need to stay current on your property taxes, homeowners insurance premiums, and any other ongoing expenses you’re responsible for, like HOA fees.”
Increased loan production may be contributing to increased interest in the Home Equity Conversion Mortgage (HECM) product category, the piece says, and higher volume figures observed in 2020 are expected to be even higher in full-year 2021 according to Steve Irwin, president of the National Reverse Mortgage Lenders Association (NRMLA).
“We saw a 34% year-over-year increase in reverse mortgage volume to over 43,000 loans in 2020, and we anticipate a similar increase in production in 2021,” Irwin told the publication.
Recent data from the federal government, however, also indicates that as much as half of reverse mortgage loan production in fiscal year 2021 came from HECM-to-HECM refinance transactions, which distorts the number of new borrowers who have been served by the industry this year. Still, the decision to get a reverse mortgage is a personal one, and should be made in consultation with trusted advisors who are aware of how a reverse mortgage can affect a potential borrower’s current financial situation.
“American retirees […] have cited outliving their savings and investments as one of their greatest retirement fears,” Irwin tells the publication. This fact, coupled with the recent heights reached in the levels of home equity in the senior demographic, may make for an opportune time to consider a reverse mortgage.
Still, the common considerations on the negative side still apply: a borrower must be sure of their ability to maintain the home to FHA standards, and to make on-time payments to property taxes and homeowner’s insurance.
“As America’s population ages, reverse mortgages have become an increasingly critical option to pay for future healthcare needs, cover daily living expenses, and to be used strategically as part of a comprehensive retirement plan,” Irwin explains to the Motley Fool.
This could make a reverse mortgage a viable option for a retiree, as long as the potential borrower does the appropriate amount of research to fully understand the potential impact such a loan could have on them and their financial plans now and in the future.
Read the column at the Motley Fool.