Is a reverse mortgage right for you? More seniors are investigating the option to tap the equity built up in their primary residence. There are pros and cons that should be considered before you decide to “borrow” money from your house via a reverse mortgage.
Pros of Reverse Mortgages
● You can choose to receive funds in monthly installment, as a lump sum, a line of credit, or even as a combination of options.
● Funds are generally not taxable and do not negatively affect Social Security or Medicare benefits.
● If you “outlive the loan” (meaning you receive more in payments than the house is worth when the loans come due), the Federal Trade Commission rules you will never owe more than the house is worth.
● You can live in a medical facility or nursing home for 12 months before the loan is due.
Cons of Reverse Mortgages
● Proceeds from your reverse mortgage could negatively impact Medicaid eligibility.
● Borrowers must be at least 62 to qualify for a reverse mortgage. Most reverse mortgages also have upfront fees such as loan origination and closing costs.
● Loan interest is not tax deductible.
● Borrowers are still responsible for paying state and local taxes, insurance, maintenance fees and other costs associated with owning a home. Some loans become due immediately if these are not paid.
Here are some links to research reverse mortgages further: