Cash-strapped baby boomers are turning to reverse mortgages as a retirement funding source despite many financial advisors’ ongoing skepticism about the product, reports the New York Post.
Last year, borrowers took out approximately $15.3 billion worth of reverse mortgages, up 20% from 2012, the article says citing Inside Mortgage Finance.
Even though reverse mortgage usage increased on an annual basis, many financial planners remain skeptical.
“I would only consider the reverse mortgage as a last resort. They cost a lot, and there are better ways to pay for retirement,” said Charles Hughes, a financial adviser, in the article. “Gone are the days of gleefully burning the mortgage and passing the home on to the children.”
With many financial planners citing high origination costs as a con, they also point to a benefit: reverse mortgage borrowers don’t have to repay the loan as long as they uphold its terms and maintain residency.
“But it can be a different story for heirs,” says the N.Y. Post, “whom lending companies can strong-arm to pay the mortgage off in full after the borrower dies, under threat of foreclosure. At the very least, it means dealing with often-confusing red tape in a time of grief and stress.”
Still, some advisors point to reverse mortgages as a solution for older borrowers who don’t have significant retirement assets.
“They can be a valuable tool for those who need cash and have no other option,” financial advisor Anthony Ogorek told the N.Y. Post.
Written by Alyssa Gerace
