Recap of Reverse Mortgages Being Featured on NBC Nightly News
In April of 2016, NBC Nightly News featured a segment on Reverse Mortgages. With Reverse Mortgage ads prevalent on television and watchdog groups consistently eyeing the mortgage industry as a whole, it’s not surprising that a major news outlet would focus on what is arguably the industry’s most controversial products. Yes, Reverse Mortgages are met with a lot of consumer skepticism, largely due to the unscrupulous lending practices of unethical lenders in the past. However, today Reverse Mortgages are heavily regulated and with newer lending rules set in place, they’re far less risky to senior homeowners. NBC Nightly News, we feel, did an excellent job explaining some of these risks as well as the benefits of a Reverse Mortgage.
NBC Nightly News’ Lester Holt presented the segment on Reverse Mortgages by introducing a major concern among senior homeowners – retirement. As retirement age draws nearer, many older homeowners feel worried about their financial wellbeing. Will their retirement provide enough income to live off of? According to the report, Reverse Mortgages may offer a viable solution to homeowners who may not have enough money to fully retire.
The NBC feature introduces Olivia Sterns, who succinctly explains what a Reverse Mortgage is, “a loan that lets you borrow against the value of your house.”
To expand on this definition, a Reverse Mortgage works very much like a traditional home loan, except that it amortizes backwards or in ‘reverse,’ hence the name. Instead of the homeowner making payments to the lender every month and their loan balance getting smaller, with a Reverse Mortgage, the homeowner borrows money based on the equity they have in their home and the lender makes payments to them, therefore making the loan balance increase over time.
- The Reverse Mortgage has a few other unique features that set it apart from a traditional mortgage:
- Homeowners may make monthly payments if they like, but none are required.
- The loan is non-recourse, protecting the borrower from declining home values.
- Homeowners can receive their Reverse Mortgage funds in a lump sum, monthly payments, as a line of credit, or a combination of these.
- Reverse Mortgages are only available to homeowners who are 62 or older.
- The Reverse Mortgage is not due to be repaid until the last surviving homeowner no longer uses the home as their permanent residence.
The NBC report also touched on the rise in Reverse Mortgage popularity. According to Sterns, improvements in government regulations and tougher lending standards may be responsible. Still, Sterns warns, “they are not for everybody.”
So who is an ideal candidate for a Reverse Mortgage? The NBC report featured the Rothschild family, who got a Reverse Mortgage to help them stay in a home they loved when the recession hit. Other families may benefit from a Reverse Mortgage in different ways, such as using it to help pay off debts, purchase a new home, or used as a way to supplement retirement income.
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According to the NBC report, this is where the benefits “can really shine.” Homeowners using a Reverse Mortgage wisely can put themselves in better financial positions for their retirement years. Here are a few examples:
Use the proceeds of a Reverse Mortgage to pay living expenses while giving other investments more time to grow. This provides the borrower with access to funds for day-t0-day costs as well as recurring bills and gives the borrower the opportunity to build more wealth for the future.
Using a Reverse Mortgage to open a line of credit but not using it. Unused funds can grow in value over time. As the line of credit remains open, the balance can continue to build and the borrower can have access to more money later.
There are several other financial strategies eligible borrowers can employ to get the most out of their Reverse Mortgage. Talk to a qualified Reverse Mortgage consultant today to find out more.
If you’d like to see the full NBC report, click here.
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