Reverse Mortgages gets a nice mention in the NY Times article 8 Reasons You Should Not Expect an Inheritance article published over the weekend. The article discusses why many children shouldn’t be expecting any sort of inheritance from their parents.
Below is a snapshot the reverse mortgage mention:
It’s getting easier to drain a home’s equity. Homeowners who are 62 or older (though there are some exceptions) can take out a reverse mortgage, which is roughly akin to a home equity loan that you don’t have to pay back until you (or your heirs) sell the house. So homeowners can tap the equity in their homes without having to make monthly payments to repay the debt.
So far, borrowers have taken out roughly 450,000 of these loans since 1990, according to the National Reverse Mortgage Lenders Association. But the pace is picking up. Lenders, including mainstream operations like Bank of America and Wells Fargo, wrote more than 100,000 of them for the first time in the year ended Sept. 30, 2007.
Meanwhile, the association says, retirees are increasingly using mortgages as a financial tool — and not simply as a last resort to pay for health care emergencies and the like.
Indeed, there is nothing to stop people from using the loan proceeds for vacations or cars or whatever they want. Millions just may do that someday, which makes reverse mortgages a real wild card. Their growth certainly raises the likelihood that large portions of family homesteads in America will end up belonging to banks, not heirs.
To read a copy of the entire article click the link below.