Is a Reverse Mortgage Right for Me?             

For many seniors whose home is their largest asset, the benefit of taking out a reverse mortgage, could provide homeowners with a sort of cash advance payment on the equity in their home. There are many households entering retirement that may not have sufficient resources to maintain a standard of living and pay unexpected costs, but before you rush to take out a reverse mortgage, it’s important to understand the potential upsides and downsides of the program.

Advantages of using a reverse mortgage

  • Borrower’s can use a portion of their home’s equity while continuing to own and live in the home.
  • Borrower’s do not have to repay the loan if they live the house, are current on taxes and insurance, and manage home improvement repairs.
  • The borrower or heirs will never have to repay more than the value of the loan, even if the home value drops. If the sale of the home isn’t enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement through the FHA.
  • Borrower’s can access additional funds to remodel their home, pay off their current mortgage, improve their quality of life, pay off high interest debt, or pay for every day expenses.
  • The reverse mortgage line of credit is a great safety net option, thanks to its unique growth ability and its guaranteed feature of growth-without withdrawals. This feature allows you to lock in the current value of your home and low interest rates and see your assets grow, even if home prices fall.
  • You will not lose your Social Security or Medicare benefits

Disadvantages of using a reverse mortgage

  • A reverse mortgage can have higher closing costs and interest rates than a traditional mortgage.
  • Interest is added to the outstanding balance every month, and any cash a homeowner receives reduces his or her equity in the house. As a result, the equity in the home may be reduced or even used up. This means heirs planning on inheriting the property may be in for a surprise.
  • The loan cannot be assumed by a family member, so a reverse mortgage may be a poor choice for families living in a multigenerational home.
  • One requirement of a reverse mortgage is that you live in the home. If you have to move – always a risk given unplanned health certainties that come with age – the loan will become due.

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