Reverse Mortgages: Monthly Checks Instead of Bills. Really?
On the upside, the FHA guarantees the loans, which minimizes risks to lenders and borrowers alike. And the loans are ‘non-recourse,’ meaning you cannot become personally liable for more than the amount of the loan. And there is no early payment penalty. If you fall behind on taxes or upkeep, you can be declared in default. But the FHA guarantee still protects you from creditors seizing other assets.
While it helps to get counseling, Stucki says there is a wealth of useful information in the form of FAQs and calculators that will tell you exactly what you can get based on your age and home equity.
Some finance experts saw the exit of major banks from the reverse mortgage market in recent years as a death knell for the loans. But Moulton sees a silver lining that might be positive. Instead of dealing with big lenders treating the loans just another financial product to sell, financial advisers may find ways to use HECMs as part of a broader financial strategy. The Journal of Financial Planning published a story about “Reversing the Conventional Wisdom” on reverse mortgages. Registered Rep, a widely read industry publication said in a recent article, "Any advisor worth his or her proverbial salt is familiar with reverse mortgages.”
“As a financial planner, I have not had many requests from my clients about reverse mortgages,” said Schwartz, whose firm has a $1 million asset minimum and the reverse mortgages may not fit "the demographics of my particular client base.” But he can see the appeal of home equity cash even more the affluent who own stocks and bonds. It could be a way “to make up for portfolio return shortfalls so they will not have to reduce their standard of living in retirement.”