Barron’s: Jumbo Reverse Mortgage Can Help House Rich Seniors

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For seniors who own homes with a notable amount of equity, proprietary jumbo reverse mortgages can be a viable option to explore when looking for the means to pay down an existing, forward mortgage or fund retirement. This is according to an article appearing at financial news outlet Barron’s.

Particularly for seniors who live in parts of the country with typically higher property values like New York or California, jumbo reverse mortgages can allow seniors the ability to access up to $4 million in loan proceeds to then apply to a wide variety of possible purposes, writes Barron’s retirement beat writer Neal Templin.

While mentioning that reverse mortgages had a long-held reputation as a loan of last resort, Templin details that this has started to change largely because of the plethora of academic writing from financial experts that have detailed how reverse mortgages can be used in a financial portfolio strategically.

“Financial experts began publishing research several years ago showing that the strategic use of reverse mortgages could help retirement portfolios better survive down markets or delay the claiming of Social Security benefits,” Templin writes. “Barry Sacks, a retired pension attorney who has published research on reverse mortgages, says retirees should follow a simple formula: If the market goes up, use the retirement account for income; if the market goes down, use the reverse mortgage.”

While the market was “shaken up” by changes made to the federal reverse mortgage program in 2017 – particularly when it comes to the lowering of principal limit factors (PLFs) – proprietary, jumbo reverse mortgage loans have been growing in prominence, and can operate largely unaffected by the rules that affect the federal program.

“[Proprietary reverse mortgages] have become popular in places with high housing values where retirees can be sitting on a mountain of equity and still be short of income,” Templin writes. “For the moment, most jumbo reverse mortgages involve lump sums. But lenders are beginning to introduce jumbo mortgages that include a line of credit in addition to a lump sum.”

The result is that seniors are using the proceeds from the loan for a variety of reasons. Templin cites Finance of America Reverse (FAR) VP of retirement strategies Stephen Resch and retirement researcher Wade Pfau as the source of information detailing some of these use cases, where seniors can, “pay off conventional mortgages or to extract money for long-term care or living expenses,” Templin says.

That being said, seniors should still take the consideration of upfront costs into account to see how it can affect their own personal situation, Templin advises.

Read the article at Barron’s.

Article by Chris Clow on