Suze Orman is a well-known financial advisor, speaker, and author who has helped countless people manage their money and achieve financial freedom. With over three decades of experience in the financial industry, Suze has become a household name in the world of personal finance.
One of the topics that Suze Orman is particularly passionate about is reverse mortgages. In this blog post, we will take a closer look at Suze's opinions on reverse mortgages and why she believes they may not be the best option for everyone.
What is a reverse mortgage?
Before we dive into Suze's thoughts on reverse mortgages, let's first understand what a reverse mortgage is. A reverse mortgage is a type of loan that allows homeowners to borrow money against the equity they have built up in their home. Unlike a traditional mortgage, with a reverse mortgage, the borrower does not make monthly payments. Instead, the loan is repaid when the borrower sells the home or passes away.
Reverse mortgages can be an attractive option for older homeowners who need extra income to cover expenses in retirement. However, there are some significant drawbacks to consider.
Suze Orman's opinion on reverse mortgages
Suze Orman has been a vocal critic of reverse mortgages for years. She has spoken out against these loans on numerous occasions, warning that they can be a risky financial decision for many older Americans.
One of Suze's main concerns with reverse mortgages is that they can be incredibly expensive. Borrowers are required to pay a variety of fees, including origination fees, mortgage insurance premiums, and closing costs. These costs can add up quickly and eat into the equity the borrower has built up in their home.
Another issue that Suze has with reverse mortgages is that they are not always a flexible option for homeowners. Borrowers must continue to pay property taxes, homeowners insurance, and home maintenance costs, or they risk defaulting on the loan. This can be especially challenging for older Americans on a fixed income.
In addition to these concerns, Suze warns that reverse mortgages can also be a risky financial decision for homeowners who may need to move or sell their home in the future. If the borrower wants to sell their home but the value has decreased, they may end up owing more than the home is worth. This can make it difficult to sell the home and move to a different location, which can be a significant problem for older Americans who may need to move closer to family or into a care facility.
Overall, Suze's opinion on reverse mortgages is that they should be a last resort for older Americans who need extra income. She recommends exploring other options first, such as downsizing to a smaller home or taking out a home equity line of credit.
Alternative options to reverse mortgages
If you are an older homeowner in need of extra income, there are several other options to consider before turning to a reverse mortgage. Here are a few alternatives to consider:
1. Downsizing to a smaller home
If your current home is too large or too expensive, downsizing to a smaller home can be a smart financial decision. Not only can it save you money on housing costs, but it can also provide you with extra cash to cover expenses.
2. Home equity line of credit
A home equity line of credit, or HELOC, is a type of loan that allows homeowners to borrow money against the equity they have built up in their home. Unlike a reverse mortgage, with a HELOC, you are required to make monthly payments. However, the interest rates are typically lower, and you can borrow only what you need, which can make it a more flexible option.
3. Renting out a room
If you have extra space in your home, renting out a room can be a great way to earn extra income. Not only can it provide you with some extra cash.
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