Why Is Makes Sense To Use Reverse Mortgage To Protect The Portfolio


Potential borrowers of reverse mortgage usually search online to gain all the information they require before making a confident decision. This is indeed a wise decision to undertake because you will know how to make comparisons on various reverse mortgage quotes from different online lenders.

Millions of Americans have not saved for retirement but they still have an option to enjoy a financially secure retirement life with reverse mortgage. Reverse mortgage loans are underutilized by seniors because of the bad reputation earned. There were salespersons that were hungry for a commission that preyed on seniors who did not understand the complexities of the loan. They also took advantage of seniors who were experiencing severe financial problems and quickly spent the money without thinking of the future.

Over the years, several changes were made by the US Department of Housing and Urban Development that oversees HECM (Home Equity Conversion Mortgage) program to make loans cheaper and safer. With the big reductions in cost, financial planners who used to shun the loan started to recommend the product to clients as a protection for their retirement portfolio.

When markets are down, people could borrow from the line of credit provided by reverse mortgage instead of selling their shares. Journal of Financial Planning said that this is a strategy that allows people to spend more without the risks of losing their retirement money.

However, Michael Kitces, a certified financial planner from Columbia, Maryland says that using reverse mortgage to protect the retirement portfolio still makes sense but the strategy is now more difficult to sell due to the new rules on reverse mortgage loans. Last October 2017, Trump administration has reduced the amount of loan that people can borrow. Costs were also increased from 0.5% to 2% of the home value which raised the upfront mortgage insurance premium for a line of credit.

Some people are still reluctant about getting reverse mortgage quotes because they have not actually learned about the benefits open to them. If you are skeptical about reverse mortgage, ask questions from the experts. Every big decision requires that you are well informed about the pros and cons.