A reverse mortgage can have several drawbacks. Before getting a reverse mortgage, it’s important to discuss your financial goals with a financial advisor.
Reverse Mortgages
- High costs: Reverse mortgages have high upfront and recurring costs, including mortgage insurance premiums, closing costs, loan origination fees, interest, and monthly servicing fees. Interest is compounded, so you pay interest on the interest.
- Debt accumulation: The debt from a reverse mortgage can grow to equal the value of your home, leaving little for your heirs. If you can’t repay the loan when you die, your heirs may not inherit the home.
- Eligibility: A reverse mortgage can affect your eligibility for certain government benefits.
- Foreclosure: Lenders can foreclose on your property if you don’t keep it in good repair, pay your real estate taxes and homeowners’ insurance, or meet other obligations.
- Liquid assets: A reverse mortgage can increase your liquid assets, which could reduce your eligibility for Medicaid benefits.