Pros and Cons

Reverse Mortgage Pros and Cons

We want you to understand the pros and cons of a reverse mortgage. You can reach anytime at 1-888-721-6272 if you have any questions about the pros and cons of a reverse mortgage.

Before obtaining a reverse mortgage it is important to consider the pros and cons of a reverse mortgage.   While a reverse mortgage can be a great choice to help pay off existing debts or an existing mortgage, obtain extra cash to pay bills or take a vacation, obtain funds to remodel your home, or just to supplement your income, an analysis of reverse mortgage pros and cons can help you decide if a reverse mortgage is right for you.  Here is some information to help you understand the pros and cons of reverse mortgages.

What are the advantages of a reverse mortgage?
Advantages of obtaining a reverse mortgage include the opportunity to obtain additional income while you are still living in your home to cover needed expenses or desired expenditures.  Since there is no requirement to pay back any portion of the loan while you still occupy the home, you cannot have the home taken from you or foreclosed while you are living in it, as long as you keep up with required tax payments, insurance and utilities. This is a big advantage because with traditional mortgages, if you cannot make the required payments on a timely basis, your house can eventually be lost through foreclosure – this cannot occur when you have a reverse mortgage unless you fail to pay the taxes and insurance.  Another big advantage to obtaining a reverse mortgage is that you do not have to worry about repaying the loan while you are living in your home since repayment only occurs once you have moved, sold the home, or have passed away.  And when you do sell the home, if the market value and selling price of the home is lower than the amount owed on the reverse mortgage, you are not required to make up the difference, but instead the lender must take a loss on the loan.  On the other hand, if the sale of the home nets you more than what you owe, you get to keep the rest.

What are the disadvantages of a reverse mortgage?
Disadvantages of reverse mortgages include the required fees to setup and maintain a reverse mortgage, which can be higher than other types of home loans, as well as the compounded interest that is due when the loan needs to be repaid.  Sometimes a home must be sold when the homeowner dies in order to repay a reverse mortgage, although the heirs may choose to refinance the loan or use other assets in order to retain ownership of the home.  Any proceeds from the sale of the home that are over the amount owed on the reverse mortgage remain part of the homeowner’s estate.  If the heirs choose to keep the home and they can come up with the funds needed to pay off the reverse mortgage in full, however, they are not required to sell the home.

Please visit our reverse mortgage FAQs or call 1-888-721-6272 to learn more.

This material is not from HUD or FHA and has not been approved by HUD or a government agency.