Reverse Mortgage Cons
To qualify, borrowers have to be at least 62, own their home outright or carry a mortgage small enough to be paid off by the proceeds. There are no income or credit qualifications, although homeowners are responsible for paying the annual taxes, property insurance and maintenance. No loans have to be repaid until the owners move or die, in which case the bank takes its share and anything left goes to the heirs. However, if the owner fails to pay insurance and property taxes, the reverse mortgage is deemed in default and the owner is in danger of foreclosure.
As a potential consumer of any financial tool, be cautious and seek out accurate information before making a decision on reverse mortgages for seniors. If you are looking for information on a reverse mortgage, the pros and cons should be analyzed, though I suggest you talk with a HUD counselor or someone impartial. Real estate agents may be prone to selling only the disadvantages of them, as they get paid when you sell your home. Your best bet is to find an impartial advisor such as a financial planner (whose brokerage doesn’t sell reverse mortgages), an elder law attorney or a certified reverse mortgage counselor, all of whom will be able to share practical information on reverse mortgage pros and cons to help you make your decision.
For those who are older and have substantial equity in their homes, a reverse mortgage can be a very good idea. Yes, there are downsides to them, the main one being that assuming you live long enough to stay in your home for the next 10+ years, there may not be much if any equity left for your heirs. Do yourself a favor and do your research and get a balanced view of the pros and cons, but don’t pay attention to biased nonsense such as is presented here.
Many seniors struggle to make ends meet each month. At the same time, they often own thousands of dollars of real estate in the form of equity in their home. But unless they take action, that equity remains untouchable, unable to help them out with basic living expense. What’s worse is that mortgage payments further reduce their available cash each month to pay crucial expenses.