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The reverse mortgage industry has made some strides in educating their borrowers on the products that are offered and how they can fit the needs of folks heading into retirement. However, a report by Chris Clow of Reverse Mortgage Daily highlighted a few negative testimonials from prospective borrowers, which was published by the Washington Post.
It's clear from reading the first comment that folks are actively looking into reverse mortgages as a retirement solution but were halted when they encountered a few negative points.
“I almost got a reverse mortgage with my wife a few years ago. The thing that stopped us was I had a low credit score, and the amount of money we’d have access to in the line of credit was pitiful. It was also expensive: The only way there would be any house value left for heirs after 15 years would be if the real estate market was on fire,” said one commenter, according to the Washington Post report. “We could literally find no one, out of five financially knowledgeable people we spoke with, who would speak positively about reverse mortgages. In some circles, those who get reverse mortgages are considered ‘poor.’”
“I think financial advisers who work with clients nearing retirement should strongly encourage them to get a ‘cash out refinance’ before they stop working (and lose the income). This would avoid the pressure to take out a reverse mortgage and leave their clients in a stronger financial position. This is what we ultimately did. This is a far-out idea (for a lot of reasons), but in comparison with getting a reverse mortgage, it may be better to take a job long enough to qualify for “cash-out refinance” (if your health allows it).”
In his analysis of the report, Clow points out that the Washington Post failed to include testimonies from an actual reverse borrower, but does not challenge that these perspectives are totally invalid. He added that stories shared by the publication are not new or isolated.
“Instead of expanding the umbrella of reverse mortgages, recent data metrics seem to indicate that the industry’s highest growing business segment is for refinance transactions, going back to customers already engaged with the product category to take advantage of the current low-rate environment,” said Clow in his report.