MoneyWise Live | March 12, 2019

Skeptical About Reverse Mortgages

Show Notes

You’ve seen the ads on TV … a much-loved and trusted actor/spokesperson says he was skeptical about reverse mortgages, too... until he got the facts. But what if there’s a good reason you were skeptical in the first place?  Maybe you were getting a reading on your “Too Good To Be True” meter about reverse mortgages … or you wondered why more of your friends aren’t getting them. Our host Rob West has 4 reasons you should be skeptical about reverse mortgages. 

  • We have 4 reasons to be skeptical of reverse mortgages. 
    • If you were counting on rising home values to secure a reverse mortgage down the road as part of your retirement income, you may want to rethink that because of the housing collapse of 2008.
    • The difficulties you might experience downsizing. A lot of folks do that in their later years if they want a reverse mortgage. Their home might not have enough equity— so they sell it and buy something smaller. Then they apply for the reverse mortgage so they have an income stream.
      The problem is that selling one home, buying another, moving into it and adjusting to the new location are all very stressful experiences— and expensive. You can handle that much better in your 50s and 60s than you can in your 80s— when many people apply for a reverse mortgage. So if you’re going to downsize— do it sooner rather than later.
    • Reverse mortgages are really for those who don’t plan on moving— ever. 
    • You might be setting yourself up for a fall. You have to be able to keep up with property taxes and maintenance costs after you get the loan. That may become increasingly difficult as you age and you have to spend more of your disposable income on health care. If you can’t keep up with home expenses as agreed to in the contract— the bank will take your home.
  • Obviously we think there are much better ways to plan for retirement income and they’re probably not a good idea for most people. In fact— some experts say they’re really only for very well-informed people who understand the product and its risks. It’s not something you go into lightly.

Next, Rob and Steve answer these questions at 800-525-7000 or via email at

  • If your dad recently passed away and you've discovered some past-due notices, how do you access his credit report and find out who he owed and is there a "statute of limitations" regarding this?
  • If you and your spouse are currently renting, have 401(k) funds, an emergency fund, some student loan debt but are not behind and have saved $20,000 and continuing to tithe, how does you decide whether to buy and what other costs are associated with buying your first home?
  • How does the Acorns app work and is it legitimate?
  • If you and your spouse have a house that is in only in his name because your credit wasn't good at first but you've heard it's best to have it in both names, how should you approach this problem with him?
  • How do debt consolidation companies work and what is the difference between them and debt management and how do they affect your credit? 
  • Is there any way to legally get out of a time-share?
  • If an advisor to you to "pay yourself first" but doesn't that conflict with tithing?
  • If you are a retiree covering your fixed expenses with your pension and Social Security, would be completely debt free if you pay off your mortgage, and have $270,000 liquid cash, should you pay off your $200,000 mortgage?
  • If your parents are 72 and had their money invested is a what's turned out to be a "Ponzi Scheme," can a reverse mortgage help their situation or should they sell and downsize?

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