February 19, 2025
Why a reverse mortgage may not be right for you, despite recent offers – even if you need the money in retirement

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Retired Americans are being bombarded with offers for reverse mortgages. These loans allow homeowners to borrow against the value of their home.

Some reverse mortgage requests are aggressive and may even end up in snailmail. They should be considered as a last resort – and only after consulting a trusted advisor who is not associated with any mortgage company.

A reverse mortgage is especially attractive to retirees who need extra cash. According to the Consumer Financial Protection Bureau (CFPB), “Many older adults value home ownership, nearly 80% own their own homes, and nine out of ten want to stay in their homes for as long as possible. Home equity is often an older adult’s largest asset, and it has increased in recent years as home prices have soared across the United States.

Here’s what the CFPB found in a recent study of reverse mortgage advertising:

  • There is a significant increase in reverse mortgage direct mail advertising volume in 2021 and 2022 compared to the previous five years.
  • Direct mail advertising went largely to low- and middle-income households.
  • Most of the direct mail ads went to consumers living in South and West regions, where reverse mortgage lending is concentrated and where a somewhat larger proportion of older homeowners report difficulty making ends meet and making mortgage payments.
  • The findings suggest that reverse mortgage advertising during the pandemic, when home prices rose and interest rates fell, focused on many older homeowners with high equity, low incomes, and in areas where homeowners have less money to own. Current affordability on housing payments is somewhat low.

As a general safety measure, avoid junk mail, text or email offers on reverse mortgages. Since your heirs or survivors may have to repay the loan upon your death to maintain the home, there is a huge downside factor involved. If you need a reverse mortgage, have an attorney review the loan and make sure you fully understand the terms.

Source: www.forbes.com

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