Advantages and Disadvantages of a Reverse Mortgage

For many people, a reverse home mortgage is a good way to increase their income in retirement - positively affecting their quality of life.
Advantages of a Reverse Mortgage
The main advantage of reverse mortgages is that they are an extremely flexible financial planning product with very few - if any - restrictions on how you receive and use the money. To many people, a reverse mortgage simply sounds too good to be true. But, there really are no catches - given the right set of circumstances, a reverse mortgage is an ideal way to increase your spending power in retirement. Key advantages and benefits of reverse mortgages include:

No Risk of Default: Unlike a home equity loan, with a reverse home mortgage your home can not be taken from you. If you default on a home equity loan, you could lose your home. The Reverse Mortgage Lenders have no claim on your income or other assets.

No Downside: You will never owe more than your home's value at the time the loan is repaid, even if the reverse mortgage lenders have paid you more money than the value of the home.

Tax Free: The money is typically tax free, since it’s a loan when the homeowner receives the funds, as either additional fixed income or a lump sum.

No Restrictions: How you use the funds received is not restricted - use them however you want, go traveling, get a car, purchase long term care insurance, pay for your children’s college education - anything goes.

Flexible Payment Options: You can receive the loan money in the form of a lump sum, credit line, tenure (lifetime) payment or some combination of the previous.

Easy Pre-qualifications: There are no income qualifications.

Home Ownership: You retain home ownership and the ability to live in your home as you want.

Guaranteed Place to Live: You can live in your home for as long as you want, Guaranteed, no kidding!

Federally Insured: Reverse home mortgages are federally insured - are known as HUD's HECM FHA insured Home Equity Conversion Mortgages (HECM) reverse mortgages. With these, even if the reverse mortgage lenders default, you'll still receive your payments.

No Maximum Loan Amount: for seniors with a large amount of home equity, most lenders offer products with any maximum loan amounts, known as Cash Advantage Accounts.
Disadvantages of a Reverse Mortgage
There are few disadvantages of Reverse Mortgages, but you will want to consider how the following factors might apply to your situation:
Beware if You are Eligible for Low-Income Assistance: If you are currently or will be eligible to receive low-income assistance from the Federal or State government (like Medicaid), you will want to be careful that income from a reverse mortgage does not disqualify you from that assistance. (NOTE: Social Security and Medicare are not impacted by a Reverse Mortgage.) We can help you with the calculation and make sure your benefits are not disrupted.

You Are Planning to Move in the Near Term: A reverse home mortgage loan is due if your home is no longer your primary residence and generally if you are planning to move soon it is not a good financial tool to use.

Your Home May Not Be Left to the Heirs: Many people dismiss a reverse mortgage as a retirement option because they want to be sure their home goes to their heirs. And it is true; a Reverse Mortgage decreases your home equity. However, you can still leave your home to your heirs and they will have the option of keeping the home, refinancing or selling the home. Most heirs (especially siblings) are happy to Mom and Dad do a Reverse Mortgage if it will make their lives better. There are numerous potential Estate and Retirement Planning benefits to a Reverse Mortgage – Give us a call so we can review all the uses & sources to make the uses a reality.

Reverse Mortgage Man
(866) 800-0280
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