Is a Reverse Mortgage Right for Me?

What is a reverse mortgage?

A reverse mortgage is something that not everyone qualifies for. It is an opportunity to use the equity value built up in a home to improve the quality of life of those who reach the retirement age of 62 or older. It allows a person to remain in their own home and retain the title, but they do not have to make any monthly reverse mortgage payments. Due to this being a special financial tool, rates for this type of loan tend to be higher than typical home loan options. Always be sure to contact your home finance professional to see if a reverse mortgage could benefit you.

What are the advantages of a reverse mortgage?

The funds from a reverse mortgage may be used to pay off an existing home loan balance and  may be paid in monthly installments. A reverse mortgage also has no effect on social security payments or Medicare benefits. Once a repayment of the loan occurs, any equity remaining is still available to the homeowner for any purpose, such as passing the equity along to heirs. If the homeowner passes before the loan is paid off, there is no liability to repay it if the equity value in the home is not sufficient to pay it off.

What are the disadvantages of a reverse mortgage?

With the benefit of the homeowner not having any payments, the loan balance tends to increase while interest also accumulates over time. The equity of the home is reduced to lower than it would have originally been for the heirs. There is a chance of Medicaid eligibility or disability payments being affected. Lastly, if the homeowner fails to pay property taxes, home insurance premiums, HOA fees, or other finances necessary to maintain the home, the loan payment will be immediately due.