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Reverse Mortgages
Positives |
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1.
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Allows the homeowner
to stay in the home permanently.
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2. |
Pays off existing mortgages.
About half of all Reverse Mortgages are used to pay off an existing
mortgage. |
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3. |
Simple to qualify for because credit score and income are not
considered.
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4. |
No monthly payments are due for as long
as the homeowner lives in the home.
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The homeowner receives
payments on flexible terms:
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5. |
A Reverse Mortgage can
not get "upside down" so the heirs will never owe more than the home
is worth. |
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6. |
Heirs inherit the home
and keep the remaining equity after the Reverse
Mortgage is paid off. |
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7. |
Proceeds are not
taxable.
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8. |
The interest rate is lower than
traditional mortgages and home equity loans |
Reverse Mortgage Negatives |
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1. |
The fees on a
reverse mortgage are the same as a traditional FHA mortgage but
are higher than a conventional mortgage because of the insurance
cost. See HECM Saver
The largest costs are:
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FHA mortgage
insurance (HECM Saver dramatically reduces FHA
mortgage insurance from 2% to .01%) |
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Origination Fee |
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2. |
Although Social
Security and Medicare are not affected, Medicaid and other
need-based government assistance can be affected if too much funds
are withdrawn (and not spent) in one month. |
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3. |
The program is not
well understood by most individuals. However, the availability of
independent free reverse mortgage counseling helps. |
