What Suze Orman Says About Reverse Mortgages (2011-Present)

May 23, 2023

Personal finance experts often address reverse mortgage questions and concerns from the general public, which typically involves a discussion of the pros and cons of these financial products. Suze Orman, known for years of experience providing personal financial expertise, including hosting the Suze Orman Show on CNBC for over a decade, has often answered questions and provided her opinions on reverse mortgages.

In addition to her time on CNBC, Orman has written 10 New York Times personal finance bestsellers and has frequently appeared as a guest on television shows; today, she hosts the Suze Orman Women & Money Podcast. She also has a detailed website today covering many financial topics, including home equity, retirement planning and strategies, “playing retirement catch up,” pensions, Social Security, and choosing a financial advisor — among other topics.

Throughout her various channels and media outlets, Orman has commented many times on reverse mortgages — sometimes with varying opinions depending on timing, economic cycles, and other factors.

Table of Contents

• What has Orman said about reverse mortgages?

• 2011

• 2021

• 2022

• Reverse mortgages are not one-size-fits-all

What has Orman said about reverse mortgages?

2011

In 2011, CNBC published an article by Orman titled “Reverse Mortgages: Know the Risks and Rewards.” In the article, Orman raised many of the common concerns about reverse mortgages, including the fact that if a borrower can’t afford their home long term, such as in the case of not being able to afford property taxes and homeowners insurance, a reverse mortgage can lead to the borrower having to move from the home.

“My recommendation is that you think of a reverse mortgage as a last-resort emergency fund in retirement, not a primary piece of your retirement plan from day one,”

In stressing that borrowers understand the full terms of the loan and how it works, Orman noted the specific types of payments for which reverse mortgage borrowers remain responsible throughout the life of the loan.

“While a reverse mortgage can indeed be a viable way to generate income, it is very important to understand that after you take out a reverse mortgage, you will still be responsible for paying the property tax, the insurance premium, and all the maintenance costs for your home,”

2021

In 2021, Orman responded to an inquiry from a senior reverse mortgage holder on the “Women in Money Podcast.” Orman indicates in the podcast episode that the borrower had contacted her after taking out a reverse mortgage upon her husband’s passing.

According to Orman’s description, which Reverse Mortgage Daily recapped at the time, the borrower had been convinced to take out the reverse mortgage to eliminate her forward mortgage payments.

“What she didn’t understand is that when you get a reverse mortgage, if you owe money on your house, part of the reverse mortgage proceeds are used to pay off the mortgage that you have on the house,” Orman said in the episode. “So now the house is free and clear, and you owe the reverse mortgage that money, so to speak, because that comes off the amount of money they’re going to give you.”

2022

Recently, Suze Orman answered a question about reverse mortgages during another episode of her “Women in Money Podcast.” While she mainly focused on reverse mortgage cautions in her response, she pointed to one crucial factor that impacts reverse mortgage borrowing power: interest rates.

Current interest rates factor significantly on the amount reverse mortgage borrowers will qualify to receive with a reverse mortgage, so it’s always important to consider the interest rate environment when applying and utilize a reverse mortgage calculator to understand the different factors that apply, including interest rate, home value, borrower age, and the amount owed on the home.

Ultimately, in her financial advice throughout the years, Orman advises caution to senior homeowners considering reverse mortgages due to the potential downsides.

Reverse mortgages are not one-size-fits-all

Despite Suze Orman not recommending reverse mortgages for all borrowers, this type of loan can benefit homeowners who understand the pros and cons. Today, many borrowers are using reverse mortgages not as a loan of last resort but as a part of a comprehensive financial plan that allows them to utilize their home equity instead of selling other investments such as stocks or as a home equity line of credit that can be used for emergency needs and/or home improvements that may allow the borrowers to remain at home while they age.

Prospective borrowers need to work with a reputable lender who can help explain the benefits, costs, risks, and rewards that reverse mortgages present. Borrowers need to understand that there are ongoing responsibilities associated with reverse mortgages, including the home’s upkeep and payment of taxes and homeowners insurance, and that a reverse mortgage is not a one-size-fits-all approach.

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2 Comments on this Article

Stuart R.
May 17th, 2024

Hi,

I am a 67-year-old single man living in Washington D.C. I have about $50,000 in savings and am self-employed. I receive $1,100 monthly from Social Security. My home balance is $500K, and the value is $1.5 million. Should I get a reverse mortgage or a line of credit? I am thinking about slowing down within the next 3 years. I have rental income that covers my mortgage payment. I am a real estate broker, and I also have two part-time teaching jobs that pay $1,200 monthly, which I plan to keep while semi-retired. I plan to sell real estate for the next 5-10 years. I want to make sure I don't run out of money during my full retirement. Any advice?

Thank you.
Reply to Stuart
- Michael Branson
  May 22nd, 2024
  
  Hello Stuart,
  
  I can honestly tell you that with your current balance owed and at your age, with today's interest rates, the HUD HECM program would not give you enough money to pay off the balance owed on your current loan. The HUD HECM generally provides a higher loan-to-value ratio, while the jumbo or proprietary programs allow for higher property values because once you hit the HUD maximum lending limit of $1,149,825, properties valued over this limit will not receive more money than those valued at the maximum. This means that with today's higher interest rates, you would be over $50,000 short to close on the HUD program.
  
  A jumbo loan would continue to give you credit for the value up to $1,500,000, and a jumbo program would provide you with sufficient funds to pay off the entire loan you have as well as give you another $30,000 - $35,000 in a line of credit to use as you please. This would allow you to eliminate any monthly mortgage payments and give you some cash, but probably not as much cash as you could get with a traditional Home Equity Line of Credit (HELOC) if you are looking for access to more cash.
  
  You need to weigh your needs and goals and do what works best for your circumstances. I don't know what your current monthly payment is or your ability to take on additional payments. Keep in mind that if you do the reverse mortgage, you still need to pay your taxes and insurance, but you would have no more monthly payments of principal and interest on your mortgage. If that payment was gone, would your income be sufficient to make your life not only manageable but comfortable for all your foreseeable income in the future? If you take out the HELOC and you have the payments you have now, plus the additional payments on a HELOC monthly, how does that affect your situation? Also, most HELOCs have a draw period for 10 years, then the loan goes into a repayment period where payments can increase significantly to fully amortize the loan within its remaining 20-year period.
  
  It sounds like you plan to have your income reduced over the next 10 years. First, you want to "slow down" in the next 3 years. And you only plan to sell real estate for the next 5-10 years. So, it really sounds like you have 3 choices:
  
  1. Get a reverse mortgage and bank all the savings you can during your income-producing years, then retire knowing you will have no payment and cash in the bank at that time.
  
  2. Take the HELOC, knowing full well that you may need to sell the home when you fully retire if your income is insufficient to cover all payments at that time.
  
  3. Consider selling your home and downsizing now. You can use a reverse mortgage for purchase and buy a home around the HUD max lending limit of $1,149,825.
  
  If you choose #3, you can use the reverse mortgage for the down payment, put the rest of the money from the sale proceeds in the bank, have no payment for life, and have a much larger nest egg when you fully retire.
  
  If your current home doesn't meet all your needs and possibly any future needs you may have (one story vs. two, correct number of bedrooms and baths, easy maintenance, near family and medical services, all amenities you might want or need), now is the time to consider making a move that can set you up for life. The reverse mortgage for purchase program can help you do all that and keep money in the bank after you are done.
  
  As always, you should consult with your financial advisor, but it is something to think about (especially if you've been thinking your current home is great but would be so much better if only it was...).
  Reply to Michael

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