8 Foremost Pros and Cons of Reverse Mortgages for Seniors

Reverse mortgages are special kinds of loans that allow borrowers to convert some of their home equity into cash. They are offered in three varieties: home equity conversion mortgage, single-purpose reverse mortgages, and proprietary reverse mortgages. For years, they have been widely marketed among seniors as an easy way to cash in their home equity to pay their bills and many other living expenses.

However, misuse of the products, such us cashing out in lump sum to pay for bills, has led to serious financial problem later on, and sometimes,home foreclosure. There are of course cases where reverse mortgages have been helpful to borrowers. This is why no one can exactly say that reverse mortgages are a bad thing. It all boils down to how one uses the product. So, for seniors out there who are considering to take a reverse mortgage, weight in the pros and cons of this financial product first.

List of Pros of Reverse Mortgages for Seniors

1. Income Source.
A reverse mortgage will provide you with an extra source of monthly income to pay your monthly bills. This is especially helpful for seniors whose pension are not enough to cover for their monthly expenses, and is a good choice for those who want to live comfortably financially after retirement.

2. Tax Benefits.
Because that “extra income” is considered a loan, the cash you will receive is generally tax free.

3. No Social Security- or Medicare-Related Penalties.
Seniors who are living on social security or receiving Medicare benefits need not worry about being penalized for getting a reverse mortgage.

4. You Won’t Owe More Than Your Home’s Value.
Aside from the fact that you need not worry about having a monthly debt to pay, you are also rest assured that you will never owe more than what your home is worth.

5. Equity Overage Belongs to You.
If your home is sold for more than your loan’s amount, the overage on the equity will be given to you or your beneficiaries.

List of Cons of Reverse Mortgages for Seniors

1. Possibility for Abuse.
When taking a reverse mortgage, you can either have the check every month or take the cash in lump sum. The danger comes with the latter. Cashing in your home equity all in one time makes you a target of sleazy insurance agents who make money by putting a series of annuities on unsuspecting seniors.

2. High Fees.
All mortgages involve costs, and reverse mortgages are not exempted from fees. These can include loan agitation fee, mortgage insurance fee, and interest rate among others. When summed up together, these fees can get extremely high when compared to the costs involved in taking a traditional mortgage.

3. Decreased Home Equity.
A reverse mortgage can almost always decrease the equity (the remaining amount when your loan is deducted from your home’s market value) in your home. You will have fewer assets or less money left to your heirs as a result.


Getting a reverse mortgage could be a good option for seniors; however, one must carefully consider its advantages and disadvantages with regard to his or her current financial circumstances.