CFPB Offers New Warning on Reverse Mortgages
August 24, 2017
The Consumer Financial Protection Bureau (CFPB) has issued a report warning older consumers the use of about the use of reverse mortgages as a tool to bridge the gap in income if they decide to delay Social Security benefits until a later age.
The CFPB report found, in general, the costs and risks of taking out a reverse mortgage exceeded the cumulative increase in Social Security lifetime benefits that homeowners would receive if they postpone claiming their benefits. The report noted that a reverse mortgage reduces the equity homeowners have in their house, which could create a negative impact if the loan balance grows faster than the property’s appreciation rate. home values will appreciate. This could limit options for moving or handling a financial shock.
“A reverse mortgage loan can help some older homeowners meet financial needs, but can also jeopardize their retirement if not used carefully,” said CFPB Director Richard Cordray. “For consumers whose main asset is their home, taking out a reverse mortgage to delay Social Security claiming may risk their financial security because the cost of the loan will likely be more than the benefit they gain.”
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