Reverse mortgages
I've always thought of RM as a last-ditch option by homeowners who had
failed to save enough for retirement. My opinion is based on the
long-held view that planning to consume principal should be avoided.
It appears that RMs are enjoying something of a renaissance and would
enjoy reading what others thought of them today. Any comments?
The issue that I have with reverse mortgages is that they often have
high fees associated with them. They are also somewhat of a craps
shoot in that you might die early and the home goes to the mortgage
company before you get much cash out, or you could hang on forever
and the mortgage company takes a bath.
I would think that someone who is planning ahead and has relatively
good credit would take out a home equity loan on the home. These
usually have low fees, good rates (at the moment), and they are
fair for both parties. When the homeowners pass on or move out,
the house would sell, and the mortgages would be settled up. No
one takes a bath in the process.
The only issue is that the home owners might outlive their money.
That is the one time that a reverse mortgage works in the home
owners advantage. It sort of works like an insurance policy that
rides on top of the reverse mortgage, and the high fees of the
reverse mortgage fund the insurance part. In this case, I would
think that there would be other better sources of insurance that
would do the same thing.