The AARP’s Take on Reverse Mortgages
The AARP, or American Association of Retired Persons, is the largest interest-group for retired people in the U.S. The AARP offers financial advice, including mentioning specific products that seniors should try (and those they should avoid) and helps seniors avoid financial scams as they get older As you might imagine, the AARP has a lot to say about reverse mortgages— both good and bad.
The AARP Warns Younger Retirees to Be Careful Before Obtaining a Reverse Mortgage
The AARP is concerned that reverse mortgages are increasingly being used by those by younger retirees— especially those in their early to mid-60s who have lost their jobs or simply haven’t prepared well for retirement. Instead of being just an additional small supplement to their income, these retirees could be using their reverse mortgage to keep up with daily expenses, or even to avoid paying their regular mortgage payment (especially if they can no longer afford it).
While it’s true that a lender cannot foreclose on your home just because there’s no equity left, they can foreclose if you don’t continue to pay your property taxes and homeowner’s insurance. AARP fears that many
The AARP Does Recommend Reverse Mortgages for Older Borrowers with Adequate Savings
While the AARP thinks reverse mortgages can be risky choice for younger borrowers who may not have much in the way of savings, they believe that they could be a great option for older borrowers who have more savings. For example, retirees in their 70s who have a decent amount of money saved up may wish to get a reverse mortgage to reduce the rate at which they draw from their retirement accounts. This way, they’ll potentially be able to keep more money in the market, allowing their original nest egg to keep growing (or at least not shrink so quickly).