The New York Times reported on “The Quiet Comeback of Reverse Mortgages,” noting that when you make sure you understand the terms and are okay with the fact that you will not likely be able to leave your home as a legacy for your heirs, it can work out. The article goes over the typical reasons a person may have a reverse mortgage—in order to have a source of income during retirement. You may also consider a reverse mortgage so you can pay for long-term care. What may be news to you is that some people are using reverse mortgages to purchase new homes; one couple the Times interviewed did this to build a new home in a retirement community.
In survey results released earlier in 2016, The American College of Financial Services concluded that many retirees and those approaching retirement age do not understand how home equity can fit into their retirement plans. At the same time, however, the group’s Home Equity and Retirement Income Planning Survey “found that 83 percent of the respondents do not want to relocate in retirement.” There is a desire to age in place but people may not exactly understand how they can make that happen.
The survey gathered information from 1000 respondents who were between 55 and 75 who had at least $100,000 in investable assets and $100,000 in home equity. A little more than half of those surveyed were men. While 44% considered using home equity as part of retirement only a quarter of the respondents would be at ease actually doing so. And about 20% were interested in leaving their home for their heirs.
According to The American College of Financial Services, just one person indicated that they had a reverse mortgage. The survey also tested respondents’ knowledge about reverse mortgages and found that only about a third were able to earn a passing grade.
If you are considering a reverse mortgage, consult a Fee-Only Financial Planner to help with your decision. This can be an advantageous move but only if you do your research and choose wisely.