A federal agency recently issued a report warning older homeowners about taking out a reverse mortgage loan in order to bridge the gap in income while delaying Social Security benefits until a later age.
The Consumer Financial Protection Bureau report found, in general, that the costs and risks of taking out a reverse mortgage exceed the cumulative increase in Social Security lifetime benefits that homeowners would receive by delaying a claim.
The bureau also released a consumer guide and video to help prospective borrowers and their families understand how reverse mortgages work.
â€œA reverse mortgage loan can help some older homeowners meet financial needs, but can also jeopardize their retirement if not used carefully,â€� said CFPB director Richard Cordray. â€œFor consumers whose main asset is their home, taking out a reverse mortgage to delay claiming Social Security may risk their financial security because the cost of the loan will likely be more than the benefit they gain.â€�
Most reverse mortgages today are federally insured through the Federal Housing Administrationâ€™s Home Equity Conversion Mortgage program, which means they must comply with the related regulations.
A reverse mortgage is a special type of home loan that allows homeowners age 62 and older to borrow against the equity they have built in their homes and defer payment of the loan until they pass away, sell, or move out. Borrowers generally receive loan proceeds as lump-sum payments, monthly payments, or lines of credit.
Increasingly, a range of financial professionals promote use of a reverse mortgage loan as a way to delay claiming Social Security benefits. With this approach, a homeowner uses a reverse mortgage loan to replace the income they would otherwise receive in Social Security benefits in the years between the minimum benefits age of 62 and their full benefits age, which varies by birth year, or later.
When beneficiaries delay taking Social Security benefits they see a permanent increase in the monthly benefit, which, based on current life expectancies, results in an increased cumulative lifetime benefit.
The full report can be found at: http://files.consumerfinance.gov/f/documents/201708_cfpb_costs-and-risks-of-using-reverse-mortgage-to-delay-collecting-ss.pdf
Manage Home Like an Investment
Realtor.com recently released â€œMy Home,â€� a new feature that empowers homeowners to manage their home like the investment it is.
The feature puts a stake in the ground to expand realtor.com beyond being merely a powerful home search tool to become an ongoing, indispensable resource for all homeowners.
With My Home, realtor.com provides homeowners with easily accessible tools and information needed to have a complete, all-in-one view of their home value, equity, financing options, neighborhood activity and trends, as well as home improvement projects that add value to their home.
â€œAt realtor.com, we help people with one of the most basic and most important needs â€” their home â€” which is often the biggest investment most people will ever make,â€� said Ryan Oâ€™Hara, CEO of Move Inc., parent of realtor.com.
â€œYet, the time they spend managing this asset once they are in the home is really limited,â€� he said. â€œWeâ€™re changing that with My Home. Now, with personalized data at their fingertips, homeowners have more insight into their investment and are better equipped to make decisions such as when to sell or when to invest in upgrading their home to their dream home.â€�
As part of My Home, realtor.com introduced an enhanced home value estimate for homeowners utilizing lender-grade valuation models to provide a better estimate of what a home is worth today and will be worth in the future.
Marty Kovacs is the 2017 Chairman of the Santa Clarita Valley Division of the 9,600-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRARâ€™s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.
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