Pros vs Cons

The Pros and Cons of Getting a Reverse Mortgage

Benefits of a reverse mortgage

  • Reverse Mortgages carry no monthly payments for the life of the loan
  • If the reverse mortgage balance exceeds the value of the home, HUD will make up the difference with no debt responsibility passed on to their descendents.
  • Reverse mortgage funds are 100% tax-free
  • Under the terms of a HUD approved mortgage, you are guaranteed the right to remain in your home
  • If you choose to receive your reverse mortgage funds in the form of a line of credit, any unused portion earns interest equal to the loan’s interest rate
  • Under the HUD’s Home Equity Conversion Mortgage guidelines, the lender is required to offer a reasonable rate and the loan origination cost is capped at 2%

Drawbacks of a reverse mortgage

  • A reverse mortgage approved by HUD is currently capped at a maximum of $625,500
  • Reverse mortgages are extremely pricey, $10,000 or more in costs to originate.
  • Interest on a reverse mortgage is only tax deductible after the loan is repaid.
  • Seniors who depend on Medicaid and Supplemental Social Security (SSI) have to be careful to not receive more in reverse mortgage payments than they spend. Reverse mortgage funds that sit in a bank account may disqualify the retiree from other assistance programs that they rely on.