Pros and Cons

Pros of Reverse Mortgage Loans  

•You can receive the funds in a lump-sum, monthly, a line of credit or a combination of these options

•Homeowner can stay in the home without making monthly mortgage payments

•Eliminates existing mortgage payments

•Heirs are not personally liable if payoff balance exceeds home value

•Heirs inherit any remaining equity after paying off the reverse mortgage

•Proceeds are tax-free; however, please consult with your financial advisor

 

Cons of Reverse Mortgage Loans  

•Loan balance increases over time

•Value of estate inheritance may decrease over time as proceeds are spent

•Fees can be higher than a traditional mortgage

•Initial FHA Mortgage Insurance Premium (2% for HECM Standard product)

•Annual FHA mortgage insurance (1.25% of reverse mortgage balance)

•Loan origination fee may be higher than traditional mortgages

•Although Social Security and Medicare eligibility are not affected by a reverse mortgage loan, needs-based government programs such as Medicaid can be affected if the amount of funds withdrawn from a reverse mortgage loan exceed the monthly income limits