Most people think of reverse mortgages as just a standalone loan. But some financial experts are seeing them as an investment strategy that lets people stay in their homes as they age, according to a recent article published by Kiplinger.
Jack Guttentag, a professor emeritus of finance at the University of Pennsylvania’s Wharton School, tells Kiplinger that the full power of a reverse mortgage can best be realized within the structure of a retirement plan.” If you have a HECM line of credit, he says, it acts “as a built in neutralizer” for a more stock-heavy portfolio, letting you remain invested in equities longer.
“A combination of updated regulations and research means reverse mortgages are now safer for consumers,” says Wade Pfau, a professor of retirement income at the American College of Financial Services.
Pfau says if people plan to stay in their home for the foreseeable future and are interested in using a reverse mortgage as part of their retirement strategy, “it makes sense to incorporate it as early as possible rather than leaving it as a last resort.” A line of credit through a reverse mortgage is like an insurance premium, he says. If you never need the insurance, “that’s great, and if you do, then you have it.”