Researchers Say Reverse Mortgages Deserve A Second Look

What’s the deal with reverse mortgages? This question was addressed in a recent Housing Wealth in Retirement Symposium held on March 23, 2018, in Washington, DC. The event was co-hosted by The American College of Financial Services and the Bipartisan Policy Center. While the symposium took a broader look at housing wealth and retirement security, a constant theme was the role of reverse mortgages under the Home Equity Conversion Mortgage (HECM) program sponsored by the federal government. A key takeaway from the researchers and policymaker presentations at the event was that reverse mortgages are underutilized by seniors today and can help provide added retirement funding security to Americans when used appropriately.

So how can reverse mortgages be used appropriately? According to research presented at the symposium by Dr. Wade Pfau and Dr. Barry Sacks, reverse mortgages can be used in a number of ways to support a more secure retirement by allowing the homeowner to age in place. Dr. Pfau presented research showing the benefits of refinancing a traditional mortgage into a reverse mortgage. He explained that a reverse mortgage can extend the longevity of a retirement portfolio when utilized to pay off a traditional mortgage. By doing this, the homeowner gets the flexibility to make mortgage payments when their cash flow and portfolio supports the payment throughout retirement, as opposed to a traditional mortgage which requires monthly payments or else the homeowner risks default.

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Note: This material is not from HUD or FHA and not been approved by HUD or a government agency.

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