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Do reverse mortgages have an undeserved bad rap? One of America’s leading retirement planning experts believes so.

Wade Pfau, professor of retirement income at The American College and Director of Retirement Research at McLean Asset Management and inStream Solutions, says Home Equity Conversion Mortgages (also known as reverse mortgages) can improve retirees’ financial sustainability and build a larger legacy for their heirs.

This is in contrast to common reverse mortgage perceptions, including them being “irresponsible” or needing to be a “last resort.”

Reverse Mortgages let Americans 62-and-up convert home equity into cash
With reverse mortgages, a lender pays you using a percentage of equity that you’ve built up from years of mortgage payments.

You’re not required to pay back a reverse mortgage while you live in the home, and you keep the home’s title. This means you’re still responsible for paying property taxes, homeowner’s insurance, HOA fees, and maintaining the home. If you pass away, sell the home, or the home isn’t your primary residence for more than 12 months, the loan comes due.

Reverse mortgages can provide retirees with a rainy day fund
Even with the best plans and preparation, you sometimes need extra money. This could be for health emergencies, car repairs, or home repairs. A reverse mortgage can help give you the additional cash you need without affecting your financial stability.

Perceptions about reverse mortgages are changing
On a recent webinar for the Financial Planning Association, Dr. Pfau admitted he had previously agreed with negative perceptions about reverse mortgages. But after joining a study on reverse mortgages, he changed his mind, writing in a Forbes article that responsible use of a reverse mortgage can enhance an overall retirement income plan.

Do you want to learn more about supplementing your retirement income? If so, please contact me to learn more about reverse mortgages!


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