Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
July 12, 2014
You may have recently seen a new reverse mortgage ad on TV. It talks about the new reverse mortgage. Is it really new? The answer is both yes and no. Reverse mortgages have evolved considerably, but they are still a product that help older Americans fund retirement by enabling them to tap into some of their home equity.
Developed by the National Reverse Mortgage Lenders Association (NRMLA), the new reverse mortgage campaign is designed to educate consumers and raise awareness for the product.
Are the New Reverse Mortgages Really a Smart Choice for Retirement?
The new reverse mortgage advertisement describes a long string of smart choices that baby boomers may have already made – going to college, finding the right spouse, buying a home, working hard, saving and investing for retirement.
However, many households are finding out that despite good intentions and hard work, they are still not adequately prepared to pay for retirement. As the nation’s 78 million boomers head into retirement, long life spans, increasing healthcare costs and cost of living increases are adding up to be more than they are prepared for.
Getting a reverse mortgage may indeed be another smart choice for you to make. As the advertisement describes — Social Security and your own savings might not give you a secure retirement on their own. However, if you also get a reverse mortgage, you might indeed have the retirement plan you need.
The new reverse mortgage rules have been backed by finance experts such as Jane Bryant Quinn, who says that reverse mortgages need to be part of retirement planning. She continues to say that reverse mortgages may be even more important than asset allocation for retirement planning: “Given the relative unimportance of asset allocations, financial advisers will be of greater help to their clients if they focus on a broad array of tools – including working longer, controlling spending, and taking out a reverse mortgage,” she said in a statement.
What Hasn’t Changed for the Reverse Mortgage? What is Not New?
The good news is that all of the great benefits that reverse mortgage borrowers received in the past are still available with the new reverse mortgage program.
“We recognize that a reverse mortgage is not a solution for everyone, but with sensible changes to the HECM program being implemented by HUD, we thought it’s time that homeowners take a fresh look to see if a reverse mortgage might be useful to them,” said Peter Bell, President & CEO of NRMLA. “Our goal is to give consumers an opportunity to make an informed decision, not stay away because of outdated misperceptions.”
What’s New? New Rules for Reverse Mortgages…
The Home Equity Conversion Mortgage (HECM) is the most popular reverse mortgage program available and allows borrowers 62 years and older to borrow against the equity they’ve built up in their home.
Over the last nine months, the program has gone through important changes as a result of the passage of the 2013 Reverse Mortgage Stabilization Act by Congress to make the product safer for consumers. These changes include:
The Department of Housing and Urban Development, which administers the HECM reverse mortgage program, is also planning to introduce a financial assessment component to help determine whether borrowers would have the ability to fulfill their financial obligations.
These changes are designed to make the HECM reverse mortgage product safer and more viable.
The consumer education effort, underway in the three pilot cities of Philadelphia, Denver, and Seattle, will also focus on helping people figure out their future retirement needs and examine all resources available to them—including home equity—as they plan for retirement.
How Do You Get a New Reverse Mortage?
All licensed reverse mortgage lenders are offering the new reverse mortgage. You can get matched to a prescreened reverse mortgage lender here. You can also get a personalized assessment for whether or not a reverse mortgage is right for you.
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2024 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.