Reverse Mortgage Pros & Cons
In order to decide if a reverse mortgage is the right choice for you, it is important to know both the pros and the cons of this financial product.
Reverse Mortgage Pros
A reverse mortgage can be an extremely helpful tool for people who wish to convert their home’s equity into cash.
- No Monthly Mortgage Payment
Gives you the opportunity to age in place with no monthly mortgage payment.
Is insured by the federal government.
- No Prepayment Penalties
Will NEVER have a prepayment penalty.
- Liquidates Equity
Liquidates your home’s equity for you to use as you choose.
- No Additional Income Tax
Does not require you to pay additional income tax.
- No Minimum Credit Rating
Does not require you to have a minimum income or credit rating.
Is non-recourse, meaning you can never owe more than your home’s value.
- Access To Additional Funds
Gives you the opportunity to gain access to additional funds to cover expenses.
- No Repayment
Requires no repayment as long as you remain in the home and remain current on the loan requirements.
- Finance Fees
Gives you the opportunity to finance any fees so there are little to no out of pocket costs.
- Flexible Payout Options
Allows you to choose one of 5 flexible payout options for any funds from it.
Reverse Mortgage Cons
Though none of a reverse mortgage’s features are specifically negative, it is important to understand any financial product completely before making a decision.
- Higher Up Front Fees
Could have higher up front fees than other types of financing
- May Become Due
When you still live in the home if you do not remain current on the loan terms
- Could Affect Eligibility
For need-based benefits like Medicaid and Supplemental Security Income
- Reduce Equity
May reduce the amount of equity left to your heirs
- No Income Interest Deductions
Does not allow any income interest deductions on your taxes until the loan becomes due
- Prevent Equity
Could prevent you from having equity in the future