Reverse Mortgage Pros and Cons

Before you decide for or against a reverse mortgage you need to be aware of both the pros and cons. You should never let anybody tell you that a reverse mortgage is all good, or on the other hand that it is the worst mistake you will ever make. You’ll want as much info about reverse mortgages as you can get before you make a decision.  Simply put, there are advantages and disadvantages associated with this financial product.


  1. Many payment options. You can receive the proceeds from your reverse mortgage in a number of ways including: term, tenure, modified term, modified tenure, lump sum, and line of credit. With so many options it is easy to find one that fits your lifestyle.

  2. No matter how you want to receive the money you never have to make monthly payments. That being said, if the borrower moves or passes away the loan is then due in full plus fees and interest.

  3. There is no way that the homeowner or heirs can ever owe more money than what the home is worth. This may be the most important benefit to keep in mind. Many worry about this detail, and in turn never consider a reverse mortgage.

  4. It is easier to qualify for a reverse mortgage than other products, such as a line of credit. The reason for this is simple: income and credit score is not considered during the qualification process.  It’s very easy to see how much you qualify for.

  5. Income received from a reverse mortgage usually does not affect Medicare or Social Security benefits.


  1. There are usually high closing costs associated with a reverse mortgage. This means more money out of your pocket upfront. For instance, origination fees will be twice as much as they are for a more traditional mortgage. Along with this, interest rates are also adjustable.

  2. Less money for your heirs. If you want to leave money to your heirs in the form of your home a reverse mortgage is not the best idea. Once you pass on, your heirs will be responsible for repaying the money received from the reverse mortgage as well as any fees or interest that may have accumulated. While this may mean less money, it does not necessarily mean no money. The equity that remains belongs to your heirs.

  3. To qualify for a reverse mortgage the borrower must be at least 62 years of age or older – there is no way around this requirement.

  4. Interest paid on a reverse mortgage is not tax deductible until the loan is paid off.

  5. During the term of the mortgage there is a chance that the lender will charge servicing fees. This is something you want to check on before you move forward with the loan. The last thing you want is for service fees to come due when you are not expecting them.

As you can see, there are both pros and cons of a reverse mortgage. It is important to be fully aware of both sides before you make a final decision and avoid any unseen pitfalls.

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