A quick Google search shows just how polarized our opinions about reverse mortgages are. If you start to type in “Reverse Mortgages,” you will be greeted with the following auto-completion options:
… are bad.
… are useful for seniors.
… are quietly making a comeback.
… are evil.
Wow! How can such a simple concept create such varied opinions?
The truth is that this type of loan isn’t difficult to understand. Basically, they allow older adults to take out a loan against the equity in their house. Seniors who take out a reverse mortgage can stay in their home.
Critics point to the fact that reverse mortgages can be expensive to take out. This article says that the costs can run as high as $30,000 to $40,000. A separate CNBC article mentioned that the costs are probably closer to $8000 to $10,000. Either way… Ouch!
In addition, some experts say that this particular type of loan can be too complex for the average consumer to figure out without professional help. This means that, while there are many legitimate reverse mortgage companies, there are bound to be scammers out there too.
Many people still believe that reverse mortgages can lead to seniors being unfairly evicted. Since the Home Equity Conversion Mortgage (HECM) program was established by congress in 1988, this fear has been significantly diminished. In fact, according to this article, HECM “completely protects the borrower’s tenure in her house.” Of course, there may be exceptions to this – like failing to pay property taxes – so, check with your attorney or financial professional before signing anything!
Somewhat surprisingly, given the negativity that many people feel about reverse mortgages, the answer is “yes.” In a 2006 AARP survey, 93% of people who took out a reverse mortgage said that they were satisfied with the experience of working with their lender.
Digging a little bit deeper, 58% said that their loan met their needs completely, 25% said that it mostly met their needs and 12% said that it partially met their needs. Only 4% said that their load either didn’t meet their needs or that they weren’t sure yet.
Does this mean that reverse mortgages are always a good deal? Absolutely not! As I mentioned before, they can be super expensive. In most cases, it will make sense to exhaust all other options before considering this type of loan. But, are they as evil as some people think? Not really.
All that said, my opinion doesn’t really matter. Your opinion matters! We have over 450,000 women over 60 in our community. Statistically, this means that we must have thousands of women who have either taken a reverse mortgage themselves or know someone who has.
I’d love to hear your perspective on this!
Do you know someone who has taken out a reverse mortgage? If so, what was their experience? Were they satisfied with the results? If not, what are your perceptions of reverse mortgages and why? Do you think that it is possible that they have improved in recent decades? Or, do they still seem like scams to you? Please join the conversation.