Pros and Cons of a Reverse Mortgage

If you are a senior citizen age 62 or older and you own a home, you may be eligible for a type of loan known as a reverse mortgage loan. The decision to take out any type of loan is one that should be made thoughtfully, and a reverse mortgage loan is no exception. If you are interested in a reverse mortgage, take some time to weigh out both the advantages and disadvantages that come along with this type of loan. Listed for you here are some pros and cons of reverse mortgage that you might want to consider before you sign on the dotted line.

Pro: Non-Taxable Income

One of the benefits of a reverse mortgage loan is the fact that you don’t have to pay taxes on it. Because it’s viewed as a loan advance, the money or credit you receive is tax-free.

Con: Reverse Mortgage Cost

Even though a reverse mortgage loan gives you instant access to money in the form of cash or a credit line, the cost to take one out is quite high. When you choose this kind of loan the cost is covered by the loan itself. Because you don’t have to pay anything out of pocket, you may quickly forget or not even fully realize how expensive your reverse mortgage loan is.

Pro: No Payments if You Stay Put

Unlike other loans that require you to make monthly payments, a reverse mortgage does not. Until the day comes that you either sell your home and move or you pass away, you won’t have to make a single payment.

Con: Lower Assistance Eligibility

If you are a senior living on a very limited income, there is a possibility that a reverse mortgage could make you ineligible for certain assistance programs. In some states, programs like Medicaid and Supplemental Social Security may view your loan as income and determine that you no longer qualify for their assistance.

Pro: Money Can Be Used as You Wish

With a reverse mortgage, the money you receive can be used however you wish. Whether you need the money to help you pay for day to day living expenses or you want to use it to help a family member pay for a college education or a special event such as a wedding, the money is yours to do with as you please.

Con: Estate Value Decreases

Because the equity in your home will automatically go down with a reverse mortgage, you may want to think about how that might impact the beneficiaries to your estate in the event of your death. The inheritance your loved ones would receive could be substantially smaller should you decide to take out this type of loan.

Pro: Easy Qualifications

As long as you are at least 62 years of age and you own your home, you will most likely have no problem getting a reverse mortgage loan. The amount of money you are eligible to receive will depend on a combination of things–namely your age, the value of your home, and current market interest rates. Your credit score and income have no bearing on your qualifications–so even if you’ve been down and out financially, you can still take out a reverse mortgage.

There are many pros and cons when it comes to reverse mortgages, and the ones listed here are just the tip of the iceberg. If you are considering a reverse mortgage loan, discuss both the benefits and the possible negative impacts of this decision with a professional such as a loan consultant or personal accounts manager. Make sure you understand all that a reverse mortgage entails and ask any questions you may have ahead of time in order to help you determine if this type of loan is suitable for you. Even though a reverse mortgage might seem like the perfect solution to your financial needs, you should make your decision with great care. Look at all of the pros and cons before you decide what will be best for you and those you will someday leave behind.

Guest post from Finley Crest. Finley writes for



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