Reverse Mortgages: Opportunities and Concerns

A CNBC article pointed out a few recent changes to the HECM:

  • Higher upfront costs, a lowered principal limit factor and an interest-rate deduction.
  • Advisors have recommended clients use reverse mortgages for cash management, delaying Social Security withdrawals and funding long-term care.
  • In August the Consumer Financial Protection Bureau issued a warning against taking out a reverse mortgage to maximize Social Security benefits.

As home equity conversion mortgages, also known as reverse mortgages, have grown in popularity in recent years, financial advisors have been employing them as risk- and cash-management tools. New government policy changes, however, may put a crimp in these strategies.

The Department of Health and Urban Development describes the HECM as “FHA’s reverse mortgage program that enables you to withdraw a portion of your home’s equity.” It is for homeowners age 62 or older.

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If you are considering a reverse mortgage (HECM), take all the time you need to investigate your options. I will spend as much time as necessary with you and/or your family to help you understand the benefits as well as the limitations of a reverse mortgage loan. It is not for everyone. But it does work very well for some people.

 

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