If you had to make a choice, which loan would you choose? Which do you think your financial planner would recommend? Well, that's exactly what the National Council on Aging went to the trouble to find out in April of 2017.
In so doing, they managed to pit a Reverse Mortgage Line of Credit directly against a Home Equity Line of Credit in a blind, head-to-head comparison, in order to find out what older consumers and financial planners really thought of reverse mortgages. And the results are astounding!
Borrower has access to line for 10 years
Must make minimum monthly payments
Lender can freeze or reduce the loan amount
Home subject to foreclosure if minimum payments, taxes, or insurance not paid
Loan balance must be paid back in full, even if borrower owes more than house is worth
No mandatory 10-year draw period
No minimum payments required
Lender cannot freeze or reduce the loan amount
Home subject to foreclosure if taxes or insurance not paid
Borrowers or heirs never pay back more than the home’s fair market value when it is sold
So, which loan makes more sense for most older consumer? Well, the National Council on Aging asked this same question of more than 1,000 older consumers in April, 2016. The results? Without knowing which products they were choosing, older consumers overwhelmingly preferred the HECM Reverse Mortgage, based on product features alone.
Furthermore, when Financial Planners were put to the same blind test, they were also more likely to recommend the HECM Reverse Mortgage over a HELOC, citing the reverse mortgage as "less risky" and a "more desirable product."