About: This video from CBS is about reverse mortgages. Reverse mortgages took a hit after the financial crisis as seniors shied away from them amid falling home values and concern about the product’s downsides.
Reverse mortgages may be ready for their own reversal of fortune. Recent government regulations have strengthened them and baby boomers are looking for additional sources of income to fund their retirements, financial experts say.
Reverse mortgages aren’t available to everybody, and they come with some serious issues, said Benjamin Weinstock, a real estate attorney and partner at Ruskin Moscou Faltischek. They’re limited to homeowners over 62 years old and can be used only for primary residences.
While they include some different risks and higher costs than traditional mortgages, reverse mortgages can provide a way for many Americans to fund a comfortable retirement and may grow in popularity as millions of baby boomers enter their golden years. Already, reverse mortgages are recovering from their post-crisis slump, with the number of loans picking up in 2013 after three consecutive years of declines, according to the National Reverse Mortgage Lenders Association.
“The reverse mortgage is going to be a lifeline for millions of retirees in the years to come,” Bankrate chief financial analyst Greg McBride told CBS MoneyWatch. “In large part that’s because people may not have enough saved in their 401(k) plans or IRAs, and the bulk of their wealth may be tied up in the equity in their home. The reverse mortgage becomes the avenue to access those funds.”
The median retirement savings for American workers is $79,300, while the median amount saved outside of retirement accounts is $49,000 for workers between 51 through 60 years old, according to Towers Watson. Yet roughly half of U.S. families have no money saved for retirement. And with many Americans living longer, even those with savings could see their funds erode over the years, leaving them with a lower standard of living as they age.
As some retirees and near-retirees consider their financial outlook, a reverse mortgage might be one option worth considering, along with other strategies such as working longer or selling your house and moving to a less expensive home, said Alicia Munnell, director of the Center for Retirement Research at Boston College, who describes herself as a fan of reverse mortgages.