Disadvantages of a Reverse Mortgage
Getting a reverse mortgage can mean the difference between living comfortably and living day to day. But, before you commit to a reverse mortgage, you must also understand the disadvantages of a reverse mortgage. So, let’s first take a quick review of a reverse mortgage and then take a look a the disadvantages.
What is a reverse mortgage?
A reverse mortgage is a home loan that lets you take some of the equity in your home and convert it into cash. So, as opposed to a regular mortgage where you pay every month, a reverse mortgage pays you! Sounds great, it’s almost like winning the lottery.
Ok, now that we know the good news, here are some of the disadvantages of a reverse mortgage to consider:
Reverse Mortgages can be expensive
Like most often in life, nothing is free. With each reverse mortgage there are fees involved. Sometimes these fees can be high because they are based on the home’s value. And, the amount of money you owe grows larger over time based on the fees and interest rates. So, you must consider if the amount of fees is to high. But, if you’re considering selling your house to survive, a reverse mortgage is still a wonderful solution, after all, you are getting money back. So, a lot of times, the money in hand is worth it.
Reverse mortgages can affect the inheritance you leave behind
When your home is sold, the cash received from the reverse mortgage, interest and fees must be repaid. But, the remaining equity in your home will go to your heirs. Important: your heirs, will not be required to pay more than the home is worth on the maturity of the loan when it is sold. However, if your heirs do wish to keep the home for sentimental reasons, etc., they will be responsible for the full amount owed which can be more.
I don’t want to stay in my home forever
Because of the costs linked to a reverse mortgage, there may be more inexpensive options. So, consider other options if you do plan on moving in the near future.
A reverse mortgage may affect eligibility for some benefits.
A reverse mortgage will not affect your social security or medicare benefits. But, the money received could impact your Medicaid benefits. So, if you are on Medicaid you should make it a requirement to contact a Medicaid expert in your area. If you don’t you may risk losing Medicaid benefits! Also, check on the affects on any other benefits such as Supplemental Social Security Income (SSI) and Medi-Cal.
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