Reverse Mortgage Cons:

1. Mortgage Insurance – All FHA loans have mortgage insurance, regardless of how much equity you have available. In the case of a reverse mortgage, it is for the possibility the balance of your loan may exceed the amount your home is worth. This only applies when it is time to sell your home and is usually in the event that property values decline. Remember, even if you use up all your equity, you will never be kicked out of your home. Because of the Mortgage Insurance, you and your heirs will never owe more than your home is worth. That is what you are paying for.

2. Compound Interest – Everyone likes to earn it, no one likes to pay it. Simply defined, it is interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. If you’ve ever had a savings account or investment that you rolled the earnings back into, you have likely earned it. Since you are not making payments on your loan, compound interest will add up.

3. Spending Your Kids’ Inheritance – I have heard some say that it is wrong to spend the children’s inheritance. But, I have to ask, “Whose money is it”? In my opinion, if you need the money, use it. You can leave what is left over, and that should be enough. You shouldn’t blow the money, but use enough to make life comfortable.

The Pros of a Reverse Mortgage:

1. Maintain Your Independence – What could be more embarrassing than asking your kids for financial help to cover monthly expenses? Would you like to need to move in with your kids? You can use your home’s equity to make ends meet and keep your dignity.

2. The Ability to Keep Your Home – Not having to move potentially decades of collected items and memories might be the best reason to do a reverse mortgage. Just the thought of moving makes most people cringe. By taking advantage of a reverse mortgage, you can afford to keep the home you love while affording the retirement you deserve.

3. Making Life Affordable – So many impoverished seniors have become so accustomed to being broke that they don’t even know that they are. Reverse mortgages allow you to access your equity and use it as a lifetime income stream. You might feel like you’ve won the lottery if you were able to get a few hundred dollars more every month.

4. No Mortgage Payments – There are no monthly payments, and you don’t have to pay back the loan as long as you maintain the home as your primary residence. This can really be helpful when times are tough.

Did you notice that the fees weren’t mentioned in the “cons” section? That is because fees are no longer a reason to not do a loan. There are new programs available that cut the fees of a reverse mortgage 50% or more. Usually the origination fee can be totally waived and you could get a large credit towards your mortgage insurance.

Before we summarize, let me admit something. Yes, I am a reverse mortgage loan officer, but I truly believe reverse mortgages are a great tool that can help a lot of people. I am not saying they are for everyone, but when I see anyone saying they are bad, I just cringe. Tools aren’t bad. It’s how you use them. If the equity in your home is the only money you have, what is wrong with using it to make life livable?

Now it is up to you to decide. Is this a tool that can help you or someone you know? Will your life be enhanced with a reverse mortgage? If you are still unsure and want more information, read more of our articles on our website.

David Prulhiere is the owner of Redwood Financial Services and he specializes in reverse mortgages. If you would like to read more about reverse mortgage pros and cons? You can also see other articles and blogs with additional reverse mortgage information.