Reverse Mortgage Disadvantages
1. You don’t get to write-off your mortgage interest:
a. Remember the 1099 form you get that shows how much interest you paid? You won’t be getting that after you complete a reverse mortgage. Since you have accrued interest and not paid interest, there is nothing to write off. Once you pay the interest, you will get the write off, but normally that occurs when the home is paid off.
b. Is the interest write off more important than not having house payments? Would you prefer to have the write off or no payments?
2. Accruing interest or your balance growing:
a. Interest accruing on your loan without making payments means the amount you owe on your loan will increase over the life of your loan. The interest that is charged monthly is added to your balance, making it get bigger each month.
b. No payments today in trade for a bigger payoff tomorrow. Most reverse mortgages are paid off when the borrower passes away, so they have permanently deferred the monthly payments.
3. Reverse mortgage fees are expensive:
a. Reverse mortgage fees are expensive when compared to a regular home loan. since there are no monthly payments on a reverse mortgage, but you do have payments on a normal loan, maybe “they” think there is some justification for higher fees.
b. New programs have recently been released that have cut the cost of a reverse mortgage in half from what they used to be. If you didn’t do a reverse mortgage before because of the cost, check again. You will be surprised on how much the fees have been reduced.
4.You leave less money to your kids:
a. It will reduce the amount you leave as an inheritance, if you spend your equity. This could be really important to those who want to leave a sum of money to their heirs, but there are alternatives to how you leave the “money”.
b. Are you really depriving anyone by spending your equity? If you have a mortgage, and you remove the monthly expense, this will leave you more cash to save or spend to maintain your independence. Your heirs may not have to chip in to help you survive. That alone saves them money and enhances their future retirement. If you have no mortgage, getting monthly income or a lump sum of money will help take care of your home and medical expenses.
You will see there are two sides to these so called “reverse mortgage disadvantages”. Just weigh the objection against the need to see if the loan makes sense to you.If you would like to bounce some ideas off of someone, email me or give me a call. You can get my contact information online at www.redwoodreversemortgage.com. You will also find a lot more information on reverse mortgages there.
Have you heard other reverse mortgage disadvantages? Follow the links if you are looking for more reverse mortgage information. You can get a free education with no obligation. You can even use our reverse mortgage calculator for free.