Why do banks not recommend reverse mortgages?

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Why do banks not recommend reverse mortgages?

Are you considering a reverse mortgage to access your home’s equity for retirement income or pay off your current mortgage? You might be surprised to hear some banks aren't exactly cheering you on. While a reverse mortgage can be an amazing financial tool, it's true that banks themselves may not readily recommend them. The reason might surprise you.

Firstly, unlike a traditional mortgage where the loan balance shrinks over time, a reverse mortgage grows with interest if you don’t make monthly payments. This means if housing prices fall and the home value dips below the loan amount, the bank faces a potential loss.

Secondly, reverse mortgages are complex loans that most loan officers don’t understand.  They take a lot of training and deep financial knowledge that bank loan officers aren’t equipped to handle.  The last thing the banks want is bad publicity because they mismanaged a critical piece of a senior’s retirement plan.

3rd, reverse mortgages are expensive for banks to service due to the extreme amount of regulation imposed on them.  This adds a lot of costs that most banks aren't willing to pay.

Reverse mortgages are complex financial instruments, and while banks might not be pushing reverse mortgages, that doesn't mean they're off the table. If you're considering this option, make sure to work with an experienced mortgage advisor that specializes in reverse mortgages.

To learn more about reverse mortgages and to find out if one is right for you visit https://reganteam.com/reverse-mortgage/ or call 707-508-8473