Reverse Mortgage Pros & Cons
Pros of Reverse Mortgages
- Cash Payments - Lump sum upfront or in the form of monthly payments
- Stay in Home - Homeowner retains title and ownership of the home and can stay in the home
- Payoff Existing Mortgage - A reverse mortgage will wipe out any existing mortgage. In some cases, homeowners have been able to prevent foreclosure with a reverse mortgage.
- Tax Free - Any proceeds received are tax free
- Social Security/Medicare OK - A reverse mortgage does not affect one's ability to receive social security or medicare.
- Protection for Heirs - If the property value decreases, the heirs are not responsible in making up the difference if they are not interested in keeping the home.
Cons of Reverse Mortgages
- Medicaid eligiblity is affected
- Higher Insurance - HECM Standard does address this by having a lowered mortgage insurance premium
- Negative Amortization - The interest on lump sum or monthly payments are added on to the loan, increasing the loan balance.
- Estate Inheritance Value - Since no interest on the loan is paid, the value of the estate will decrease