Financial Advisors and Reverse Mortgages
It has been the general rule, that Financial Advisors and Estate Planners would not recommend the use of a Reverse loan as an option to manage cash flow or as an option to selling a home and moving. But there does seem to be a trend within this industry to reconsider past opinions and view the use of a Reverse loan as a viable tool in retirement planning.
“Trade in your mortgage payments for monthly installments of cash? Really? That question is posed by a lengthy CNBC article published Tuesday on reverse mortgages.
CNBC covers the bases on reverse mortgages from the “new” Saver product to the way financial planners are starting to include reverse mortgages in their “toolboxes.” Talking to several financial planners who have changed their tune on reverse mortgages, CNBC finds that while the loans are not without their cautions, they may be gaining interest from a new population of borrowers.
CNBC writes :
“It helps, of course, to know what you are getting into. Reverse mortgages are loans turned upside down. Your monthly payment is deferred to a future date. When you sell the home it all comes due and it is repaid from remaining equity. It is a transaction that resembles shorting a stock more than it mirrors taking out a traditional home mortgage.
…Reverse mortgages in general could have appeal for the growing army of ‘unretired,’ said Andy Schwartz, a wealth manager and owner of Bleakley, Schwartz, Cooney & Finney.
“Things are changing, people are rethinking retirement, and this is one way people might use to get some money while they do that,” he said. “Even people with a lot of wealth are facing short-term income demands they never expected. This is one option for freeing up home equity. And if home values rise, they can still get the increased equity.”
IRA expert and accountant Ed Slott, chief executive of Ed Slott and Company LLC said it’s a better way to raise cash than to raid your IRA. “Those are the hardest funds to replace – they represent a lifetime of savings.” For people who are nearing Social Security milestones it can provide a bridge loan until they reach the qualifying age.”
Written by Elizabeth Ecker