Reverse Mortgage Pros and Cons

A reverse mortgage refers to a specific type of home loan for seniors 62 and older. it requires no monthly mortgage payment. The term “reverse” is used because the loan works in the opposite direction of a traditional mortgage. With this unique mortgage type, the lender pays the borrower, allowing him to convert the value of their home into cash.

For retirees, they are to determine whether the lender makes payments as a single lump sum or a regular monthly payment (monthly tenure, a line of credit (Where they dictate when and how much to borrow). Throughout the span of the mortgage, the homeowner keeps the home title as security for the loan, and interest is charged on the proceeds they receive, which compound over the life of the reverse mortgage. As the loan advances their debt increases. When the senior homeowner either moves out, passes away, or no longer resides in the home as their primary residence the lender recovers the loan balance when the estate is settled. Let’s look at the reverse mortgage pros and cons:


Not every homeowner qualifies for this type of loan. Eligible property types include single-family homes, up to 4 unit properties, manufactured homes and townhouses. Trailer homes do not qualify. Other requirements are: the applicant should be the owner of the home, be at least sixty-two years of age and their home should hold substantial equity. Lenders conduct a financial assessment of the borrower to ensure he or she is capable of paying mandatory responsibilities, such as taxes and insurance.

PROs and CONs of Reverse Mortgages

Homeowners enjoy the following benefits from a reverse mortgage:

  • They receive money from their home to sustain a desirable lifestyle.
  • There are less expensive programs known as HECM s (Home Equity Conversion Mortgages) which are insured by the U.S. government
  • Reverse mortgages advance as the homeowner ages. The older the senior is the more money they qualify for.

Some cons of the Reverse Mortgage may be involved with this type of loan:

  • Once a reverse mortgage is purchased, chances of being able to receive other types of loans decrease.
  • For the borrower, the reverse mortgage affects the inheritance of their heirs.
  • The borrower might lose their eligibility for Medicaid and Supplemental Security Income (SSI).


Reverse Mortgage Explained

What is a reverse mortgage?
Find out here.

Reverse Mortgage Requirements

Are you eligible for a reverse mortgage?
Find out here.