Reverse mortgage credit lines are becoming more and more attractive to younger HECM borrowers amid the specter of rising interest rates, a Wall Street Journal article published today claims.
The story features quotes from multiple financial advisors and retirement experts extolling the virtues of taking out a home equity conversion mortgage line of credit as early as possible to hedge against future fluctuations in the stock market, home prices, and interest rates.
The WSJ cites research from brothers Barry H. and Stephen R. Sacks — a tax attorney and a retired economics professor, respectively — which recommends that borrowers use their lines of credit to weather down stock markets, allowing time for their investments to grow and preventing significant interruptions in lifestyle. This strategy improved the borrower’s chances of retaining wealth into old age, the Journal reported.
The Journal notes multiple potential downsides to the HECM line of credit, advising readers that the origination fees — giving an example of $9,000 on a credit line of approximately $200,000 — make it a less desirable short-term option. The paper also provides the often-mentioned caution about the potential lack of inheritance for the borrower’s heirs.
But overall, the Journal strikes a positive tone about the use of HECM credit lines, ending with this quote from Jamie Hopkins, an associate professor of taxation at the American College of Financial Services: “If home equity is incorporated more strategically in the future, we will see vast improvements in the financial security of retirees.”