Reverse Mortgages Slowly Make a Comeback

August 24, 2016 | Comments Off on Reverse Mortgages Slowly Make a Comeback


The New York Times is dubbing the reverse mortgage the “quiet comeback” kid in the mortgage marketplace.

Reverse mortgages allow home owners 62 years old or older to tap into their home equity without having to face monthly payments. Reverse mortgages had a bad reputation a few years ago when widespread abuses of their use was reported. But now they’re gradually making their way back into the market, as reforms in the system make them a safer option for lenders. The Federal Housing Administration and the Consumer Financial Protection Bureau have tightened regulations on their use.

Reverse mortgage volume was around 30,000 this year, modest compared to about 115,000 from its peak in popularity in 2009, according to the Federal Housing Administration.

“They’ve always been there as a last resort,” John Salter, a financial planning professor at Texas Tech, told The New York Times. “But they make a lot more sense now because home equity can be a big part of net worth.”

More financial planner are starting to recommend them due to the lowers costs and better consumer protections – such as the mandate that counseling is now required, says Jamie Hopkins, a professor at the American College of Financial Services.

“Many people don’t have enough money to get through retirement, so they have to consider all of their wealth, including home equity as a retirement income source,” Hopkins says.

Still, reverse mortgages aren’t right for everyone. “If you want to provide a bequest to your heirs by allowing them to sell your home upon your death, a reverse mortgage can wipe out much of the equity in your home,” The New York Times reports. The loans also can prove more challenging for those who need to move due to a disability or need to sell their home after a short period of time living there.

Source: “The Quiet Comeback of Reverse Mortgages,” The New York Times (July 22, 2016)


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