Pros and Cons of Reverse Mortgages

Know the Pros and Cons of Reverse Mortgages

A reverse mortgage is a major financial decision.

What works for someone else might be different for you.

It's Important to understand all the benefits and drawbacks to make an informed decision.

Reverse Mortgage Pros
  • No repayment if the home is your primary residence and if you stay up to date with property taxes, insurance and home repairs.
  • Supplement your fixed income with reverse mortgage funds to cover your daily expenses.
  • Use your reverse mortgage proceeds in any way you choose.
  • No prepayment penalties if the loan is paid off early.
  • Most closing costs usually can be financed into the loan, which reduces out-of-pocket costs.
  • Requires pre-loan counseling to ensure you're completely informed about the reverse mortgage.
  • A non-recourse mortgage loan: you or your estate will never owe more than the appraised value of the home when it becomes due and payable.
  • Flexible disbursement options: lump sum, monthly term payment, line of credit or combination.
  • Can be used to pay off other existing mortgages.
Reverse Mortgage Cons
  • Depending on the program, the up-front fees may be higher than other types of financing.
  • Reduces the amount of home equity for your heirs.
  • Could affect government need-based assistance like Medicaid and SSI.
  • Doesn't allow tax deductions for interest until payments are made or the loan becomes due.
  • Can become due and payable in full if the terms of the loan are not met.
  • May seem complicated or difficult to understand.