Most people that use reverse mortgages to pay for everyday expenses in retirement. 

When you look at the reverse mortgage pros and cons, you may be wondering why people would consider this option. While it might not be ideal in all situations, reverse mortgages are often the only way for some people to survive through retirement.

Continue reading this article to find out what you need to know about reverse mortgages.

Reverse Mortgage Pros and Cons You Need to Know

If you or someone that you know is considering a reverse mortgage, then you need to understand how the process works. The following pros and cons will help you understand more about this option and if it is the right thing for you.

Cons of Reverse Mortgages

Let’s look at reverse mortgage cons before the pros.

May Not Qualify

If you’re not 62 or older, then you may not qualify for a reverse mortgage. If you owe too much on your home, you may not qualify either. You have to have equity in your home before you can qualify for a reverse mortgage.

May Not Offer as Much Money as You Want

There are many factors that go into determining how much money you will get when you do a reverse mortgage. Some of the things the lender takes into consideration are you and your spouse’s life expectancy, home value and how much equity is in the home.

High Closing Cost and Interest Rate

When you get a reverse mortgage, you may not feel like you’re paying for it, but you are. There are high-interest costs and closing costs. Many people find the only way they can pay off their reverse mortgage is to sell their home.

Since most people use the reverse mortgage to live through retirement, many people understand they will not have the house to will to their children. You can learn more about a reverse mortgage in this article.

Pros of Reverse Mortgages

While it might sound like this article is against reverse mortgages, there are plenty of pros to think about if you’re considering a reverse mortgage. Here are some of the top pros you need to consider.

No Monthly Mortgage Payments

If you’re retiring and the thought of paying a mortgage until the end of your days is frustrating, a reverse mortgage may be a good option for you. When you’re eligible for a reverse mortgage, you will be able to live in your home for life without paying another mortgage payment. 

The loan is repaid when you vacate your home permanently. Reverse mortgages are different than a forward mortgage which means it is much easier to qualify for. You do still need some income, but it isn’t nearly as much as what you’d need to qualify for a forward mortgage.

Use Funds for Whatever You Need

When you get a reverse mortgage, you can use the funds for anything you want. These funds are yours to do whatever you need to do from paying for food, vehicles, taking vacations or anything else you want to do.

You can take the money in a lump sum, flexible line of credit, payments each month for a certain term or until the end of your life. Since the money is a loan, it is treated as a loan and not as income. You should speak to your tax professional to verify the information as we are not financial or tax advisers.

Guaranteed Line of Credit

The thought of retirement without enough money to support yourself is a scary thought. A reverse mortgage can help give you peace of mind.

With a reverse mortgage, you have a guaranteed line of credit as long as you still have money in your line of credit. You must meet the necessary obligations for HUD to ensure your payment. 

You nor your heirs will never owe more than what the property is worth. Many people worry about what a reverse mortgage will do to their heirs, but it will not hurt them. They may have less of an inheritance, but that is the only thing that will change.

Home Purchase Feature

When you get into your 60s, it can be very difficult to get a forward mortgage. Getting a forward mortgage at this age is near impossible. One of the things people choose to do is use the home purchase feature of the reverse mortgage.

The home purchase feature of a reverse mortgage doesn’t require you to have as much of an income. Many people don’t have the money to pay cash for a home in their retirement years, and a reverse mortgage can help you keep from having to come up with the cash. Some people find themselves in homes they don’t love because they can’t afford a home they like.

Reverse Mortgages — Yea or Nay?

Now that you know more about reverse mortgages, you can probably tell if they are for you or not. If you’ve felt the stress of paying your mortgage and don’t want to be stuck in your home without money, then a reverse mortgage might be for you.

On the other hand, if you have plenty of money and want to leave your home to your heirs, then a reverse mortgage might not be the best option for you. Understanding where you are and what you want is going to help you determine if this type of mortgage is the right option for you.

Making a Decision on Your Homeowner Status

After looking at the reverse mortgage pros and cons, you may not be sure which way you want to go. Some people aren’t even sure if they want to be a homeowner. If you still have questions about what you should do and how you should do it, we have more articles to help.

One of our popular articles is about the pros and cons of buying a mobile home. Read through our article today and gain more clarity on how you should proceed with your housing situation.