Reverse Mortgage Pros & Cons
There are advantages and disadvantages of getting a reverse mortgage. Each person's situtation is different and should consult with a financial advisor regarding reverse mortgages. Most would agree that reverse mortgage loans should only be used as a last resort.
Reverse Mortgage Pros
- Tax free
- No income qualification necessary
- Receive monthly payments, lump sum or line of credit
- Funds can be used for any purpose such as senior care, senior housing, etc...
- No credit check (some lenders are starting to use credit as a factor)
Reverse Mortgage Cons
- Higher initial fees - Mostly in the form of mortgage insurance
- Essentially a negative amortization loan - No interest is due until borrower moves out or passes away. Interest is added onto the principal of the loan during the lifetime of loan.
- May affect eligiblity of government assistance programs that have a qualification based on net worth such as Medicaid