Pros and Cons of Reverse Mortgage Loans

Learn the Pros and Cons of Reverse Mortgage Loans

No home loan solution is perfect, but for many, the HECM pros far outweigh the cons. Check them out and decide for yourself!

What Could You Qualify For?

The Pros of Reverse Mortgage Loans

You are not obligated to make a monthly mortgage payment—although you can—for as long as you meet the loan terms, which require you to live in your home as your primary residence and pay property-related taxes, insurance, and upkeep expenses
You can access a portion of your home’s equity without incurring income tax*
You are able to receive payments in several different ways: a single, lump sum disbursement; a line of credit to draw from as needed; or steady fixed monthly advances (either for a set number of months or for the life of the loan)
The loan proceeds can be used for just about any purpose. Common uses include: supplementing monthly income, establishing an emergency fund, refinancing an existing mortgage and paying for in-home care or home renovations
You can age in a familiar home without having to sell it in order to access the equity
You retain the title to your home until you pass away, sell the home, move, or reach the end of the loan terms. As the homeowner, you can remodel your home or even sell it at any time—just like you could if you had a traditional forward mortgage
A reverse mortgage generally does not affect Social Security or Medicare benefits
A reverse mortgage is a non-recourse loan, meaning neither you nor your heirs will ever owe more than the home is worth when a maturity event occurs (e.g., if you permanently move out of the home, making the loan due and payable) and your home is sold to satisfy the loan**
If the home’s sales price is less than the balance on your loan, you or your heirs aren’t responsible for paying the difference. Conversely, if the home sells for more than the loan balance, you or your heirs keep the difference. The FHA insures the loan’s non-recourse benefit
Almost all of the upfront costs, including reverse mortgage closing costs and ongoing fees, can be rolled into the reverse mortgage. One exception is the HECM counseling fee, which has to be paid from your own funds and is typically around $125
You can access a growing line of credit on any unused funds. The unused portion of the line of credit will grow each month at the same compounding rate as the loan balance, giving you access to even more funds in retirement
Qualifying for reverse mortgages tends to be easier for older-adult homeowners than a traditional mortgage, home equity loan or home equity line of credit. (There is no minimum credit score requirement, and the income requirements are less stringent)

The Cons of Reverse Mortgage Loans

The unpaid reverse mortgage loan balance grows over time as interest and fees get added to the outstanding loan balance. (Note: You can pay down the loan balance at any time, paying as much or as little as you’d like)
You’re drawing down on your home equity. Naturally, that likely means your heirs would have less money (or no money at all) coming to them from that particular asset. However, by strategically tapping home equity first, you may be able to extend the life of your other productive assets, potentially leading to a greater net worth to leave to your family*
Your eligibility for needs-based programs (such as Medicaid) may be affected
The upfront costs tend to be higher than a traditional mortgage or other type of home equity loan
A reverse mortgage must be in the first lien position. Any existing mortgage on your home must be paid off in full before establishing a reverse mortgage. (Note: A borrower can apply proceeds from the reverse mortgage to pay off an existing mortgage at closing)
You must meet your loan obligations to avoid triggering a maturity event, which would make the loan due and payable. Your loan obligations include occupying the home as your primary residence and paying your property taxes, homeowners insurance, upkeep expenses and HOA fees (if applicable)

How Could You Use a Reverse Mortgage Loan?

See how many other people use their loan proceeds to improve retirement life.

Learn More Now

Do You Still Have Questions?

A reverse mortgage can be a great option to help you make the most of your retirement cash-flow strategy.

Even so, it’s a huge decision. Reach out to Leslie and the Kight Team to get answers to any questions that you have.

Invest in the Future You Deserve.

Not only do you deserve a home you love, but one that will lead to a better future. We can help you get there.

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*This advertisement does not constitute tax or financial advice. Please consult a tax and/or financial advisor for your specific situation.

**There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.

Learn the Pros and Cons of Reverse Mortgage Loans

No home loan solution is perfect, but for many, the HECM pros far outweigh the cons. Check them out and decide for yourself!

The Pros of Reverse Mortgage Loans

You are not obligated to make a monthly mortgage payment—although you can—for as long as you meet the loan terms, which require you to live in your home as your primary residence and pay property-related taxes, insurance, and upkeep expenses

You can access a portion of your home’s equity without incurring income tax*

You are able to receive payments in several different ways: a single, lump sum disbursement; a line of credit to draw from as needed; or steady fixed monthly advances (either for a set number of months or for the life of the loan)

The loan proceeds can be used for just about any purpose. Common uses include: supplementing monthly income, establishing an emergency fund, refinancing an existing mortgage and paying for in-home care or home renovations

You can age in a familiar home without having to sell it in order to access the equity

You retain the title to your home until you pass away, sell the home, move, or reach the end of the loan terms. As the homeowner, you can remodel your home or even sell it at any time—just like you could if you had a traditional forward mortgage

A reverse mortgage generally does not affect Social Security or Medicare benefits

A reverse mortgage is a non-recourse loan, meaning neither you nor your heirs will ever owe more than the home is worth when a maturity event occurs (e.g., if you permanently move out of the home, making the loan due and payable) and your home is sold to satisfy the loan**

If the home’s sales price is less than the balance on your loan, you or your heirs aren’t responsible for paying the difference. Conversely, if the home sells for more than the loan balance, you or your heirs keep the difference. The FHA insures the loan’s non-recourse benefit

Almost all of the upfront costs, including reverse mortgage closing costs and ongoing fees, can be rolled into the reverse mortgage. One exception is the HECM counseling fee, which has to be paid from your own funds and is typically around $125

You can access a growing line of credit on any unused funds. The unused portion of the line of credit will grow each month at the same compounding rate as the loan balance, giving you access to even more funds in retirement

Qualifying for reverse mortgages tends to be easier for older-adult homeowners than a traditional mortgage, home equity loan or home equity line of credit. (There is no minimum credit score requirement, and the income requirements are less stringent)

The Cons of Reverse Mortgage Loans

The unpaid reverse mortgage loan balance grows over time as interest and fees get added to the outstanding loan balance. (Note: You can pay down the loan balance at any time, paying as much or as little as you’d like)

Your eligibility for needs-based programs (such as Medicaid) may be affected

The upfront costs tend to be higher than a traditional mortgage or other type of home equity loan

A reverse mortgage must be in the first lien position. Any existing mortgage on your home must be paid off in full before establishing a reverse mortgage. (Note: A borrower can apply proceeds from the reverse mortgage to pay off an existing mortgage at closing)

You must meet your loan obligations to avoid triggering a maturity event, which would make the loan due and payable. Your loan obligations include occupying the home as your primary residence and paying your property taxes, homeowners insurance, upkeep expenses and HOA fees (if applicable)

How Could You Use a Reverse Mortgage Loan?

See how many other people use their loan proceeds to improve retirement life.

Do You Still Have Questions?

A reverse mortgage can be a great option to help you make the most of your retirement cash-flow strategy.

Even so, it’s a huge decision. Reach out to Leslie and the Kight Team to get answers to any questions that you have.

Invest in the Future You Deserve.

Not only do you deserve a home you love, but one that will lead to a better future. We can help you get there.

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