What are the pros and cons of a reverse mortgage?

A reverse mortgage is a type of home loan that allows homeowners who are 62 years or older to borrow money against the equity in their homes. Here are some pros and cons of a reverse mortgage:

Pros:

1. Additional income: A reverse mortgage provides homeowners with additional income to supplement their retirement income, which can be useful for paying bills, medical expenses, or home renovations.

2. No monthly payments: Unlike traditional mortgages, reverse mortgages do not require monthly payments. The loan is repaid when the homeowner sells the home or passes away.

3. Flexibility: Homeowners have the flexibility to receive their funds as a lump sum, line of credit, or monthly payments.

4. Protection: Reverse mortgages are insured by the Federal Housing Administration (FHA), which offers protection for homeowners against lender insolvency.

Cons:

1. High fees: Reverse mortgages can have high fees, including origination fees, closing costs, and mortgage insurance premiums.

2. Reduced inheritance: The loan amount plus interest is typically repaid when the homeowner sells the home or passes away, which can reduce the amount of inheritance that heirs receive.

3. Home equity reduction: The loan amount plus interest will reduce the homeowner's equity in the home, which could limit their ability to access the equity in the future.

4. Risk of foreclosure: If the homeowner fails to pay property taxes, insurance, or maintain the property, the lender can foreclose on the home.

Before considering a reverse mortgage, it is essential to speak with a financial advisor and understand all of the potential pros and cons to determine if it is the right choice for your unique situation.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.