Pros and cons of a reverse mortgage
A reverse mortgage could be a key component to your retirement planning, providing funds now and for the future — but it's not the right choice for everyone. It's important to
understand the advantages and disadvantages to help you determine if a reverse mortgage is right for you.
PROS
You continue to live in your home and retain title to it.
Choose to take funds as a lump sum, line of credit, monthly advances or a combination.||
Funds can be used to pay off the existing mortgage on your home.
No monthly mortgage payments are required as long as you live in the home. As with any mortgage, you must meet your loan obligations, keeping current with property taxes,
insurance, and maintenance.
Closing costs and ongoing fees can be financed with the reverse mortgage loan, so out-of-pocket expenses can be minimal.
Loan proceeds are generally not considered taxable income. Contact your tax advisor for additional details.
Generally, a reverse mortgage loan will not affect Social Security or Medicare benefits.||
As a non-recourse loan, neither you nor your heirs are personally liable for any amount of the mortgage that exceeds the value of your home when the loan is repaid.
If your home increases in value, you can potentially refinance your reverse mortgage to access even more funds.
After the loan is repaid, remaining equity belongs to you or your heirs.
CONS
Loan balance increases over time as interest and fees accumulate.
You can still leave the home to your heirs, but they will have to repay the loan balance.
Fees may be higher than with a traditional mortgage. (Ask me about RMF's lower out-of-pocket cost options.)
Eligibility for needs-based government programs, such as Medicaid or Supplemental Security Income, may be affected. Consult a benefits specialist.
Loan becomes due when a “maturity event” occurs, such as the last surviving borrower passes away or the home is no longer the borrower's principal residence.
Loan also becomes due if obligations such as maintaining the property and paying property taxes and insurance are not met.