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Reverse Mortgage Pros and Cons (2020 Update)

Reverse Mortgages to Income

Are you thinking about getting a reverse mortgage? In this article, I’ll go over reverse mortgage pros and cons.

Reverse mortgages have been popularly marketed as a great means of getting cash for older adults for paying off expenses or creating an income stream. While it does sound like a great financial tool, you’ll have to do your own due diligence to avoid foreclosures, outliving the income provided, and fulfilling the requirements to avoid termination.

Quick disclaimer: the information that I’m providing is for educational purposes only. Please seek a professional if you’re looking for financial or tax advice.

Let’s get started…

What is a Reverse Mortgage?

A reverse mortgage is a type of home equity loan catered to older adults. The big differences are that you’re not making payments to the lender (as they’re paying you) and the repayment is deferred. For example, a 62-year-old homeowner who has a considerable amount of home equity may borrow against the value of their house. He/She will either then get the funds through a lump sum, fixed monthly payment, a line of credit, or a combination of payment types (source).

Who Can Apply for Reverse Mortgage?

Here’s a quick list of the requirements from the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.

Older Couple

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3 Types of Reverse Mortgages

One of the common requirements for reverse mortgages is that you’ll have to speak to a loan counselor to discuss the reverse mortgage, alternatives, qualifications, and implications of the options.

Pros of Reverse Mortgages

Cons of Reverse Mortgages

Conclusion

Reverse mortgages are a great financial tool to increase your income or pay off debt. All while keeping your home provided you pay for its maintenance and other expenses. But do note that you will leave your heirs without a home to inherit. You also need to consider your financial situation before considering a reverse mortgage or you might end up losing your home.

Featured image by Clker-Free-Vector-Images.