Reverse Loans and the Last Resort?

No, they aren’t the mortgage of “last resort” as more and more professionals are beginning to understand.   They are a very valuable tool that can be used to extend retirement funds and avoid taxation under certain circumstances.

Here is the remainder of an article that discusses the enlightened understanding of one Financial Planner in regards to  the benefits that are to be had, by using a Reverse mortgage for retirement planning.

Kitces: Reverse Mortgages Don’t Have to be Loan of Last Resort
Posted By Alyssa Gerace On September 19, 2013 @ 6:11 pm In News,Reverse Mortgage | No

Reverse mortgage loans have remained relatively unpopular, he says, due in part to high upfront fees, and are often viewed as a loan of last resort.

“The reality is that the lack of any cash flow obligations for a reverse mortgage actually allows it to eliminate the sequence risk from the mortgage-in-retirement strategy,” says Kitces.

However, there are still some caveats to going the reverse mortgage route, writes the financial planner, including the ongoing borrowing costs, lending limits that may reduce the loan’s usefulness for more affluent clients, and upcoming changes soon to be implemented by the Department of Housing and Urban Development that will substantially change the program.

Caveats aside, reverse mortgages can alleviate sequence risks associated with traditional amortizing mortgages, he says, which can make them especially appealing to retirees with certain risk preferences.

“Thus, while reverse mortgages have typically been viewed primarily as a ‘loan of last resort’ for those who have entirely depleted their other assets,” he concludes, “the reality is that reverse mortgage strategies should perhaps receive much greater consideration in the earlier stages of an affluent retirement plan.”

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