One of the greatest challenges facing retirees, particularly in today’s low-interest rate environment, is generating sufficient income for everyday living expenses. And for the 41% of Americans aged 55 to 64 with no retirement savings, their home may become their most effective way to fund retirement.
The combination of those two trends makes reverse mortgages so appealing to so many people. With a reverse mortgage, a homeowner age 62 or older can turn the value of his or her home into cash, without having to make monthly payments or moving. You can take the cash as a lump sum, in equal installments, or as needed through a line of credit.
As Walter Updegrave recently noted in his RealDealRetirement blog, a 65-year-old with a $250,000 home might be able to borrow up to $127,000 through a reverse mortgage, according to the Boston College Center for Retirement Research.
But reverse mortgages have drawbacks, too.
A reverse mortgage can be an extremely expensive and tricky way to borrow, so you need to understand the risks and costs before proceeding. It ensures that a significant portion of your home equity will be given to the bank in the form of fees and interest, rather than to your own retirement funds or your estate.
Implications For Your Family
A reverse mortgage can also have serious implications for your surviving spouse and family after you die — a family member living in the house who didn’t go in on the loan could be forced to move out — so you’ll need to factor this in when deciding whether to sign up.
It’s not too surprising that The Consumer Financial Protection Bureau (CFPB) has received 1,200 reverse mortgage complaints since December 2011, according to the federal agency’s recent report about them. As the report said: “Many older consumers and their families are confused and frustrated by the terms and conditions of reverse mortgages.”
read more http://www.forbes.com/sites/nextavenue/2015/02/19/reverse-mortgages-the-rewards-and-risks/
No comments:
Post a Comment