5 options to a reverse mortgage
Despite this record increase in retirement home equity, the popularity of reverse mortgages among older Americans remains low. Only 42,000 home equity conversion mortgages (HECMs) were sold in 2020 – up half from 2010 Boston College, according to the Center for Retirement Research (CRR )’s Department of Housing and Urban Development (HUD).
Citing a 2017 report by the Consumer Financial Protection Bureau (CFPB), the CRR found that one possible reason for the decline is that reverse mortgages are not following many seniors’ plans for their homes.
“A reverse mortgage reduces the equity homeowners have in their home,” the report said. “Homeowners looking to sell their home after taking out a reverse mortgage are particularly at risk, as the loan balance is likely to grow faster than their home value will rise. This could limit options for moving or dealing with a financial shock. “
What Should Home Owners Consider Before Taking Out A Reverse Mortgage?
A reverse mortgage is for retirement homeowners who have either paid off their mortgage or have built up a lot of equity in their homes. This type of mortgage is aimed at homeowners who want to use their home equity to access a fixed monthly payment, line of credit, or a combination of both without losing ownership of their property.
Reverse mortgages are often tax-free and repayments are deferred until the homeowner moves out, sells the home, fails to pay property tax or insurance, or dies. After that, the property is sold and the excess goes to the owner or his heirs.