You are here: Home Options Pros and Cons

Gaining popularity with consumers nationwide, the federally insured reverse mortgage, which is called the Home Equity Conversion Mortgage (HECM), has generated both positive and negative media attention. Many homeowners find a reverse mortgage to be extremely beneficial; however, they are not a perfect fit for everyone. Before obtaining a reverse mortgage, consider the pros and cons listed below to help determine whether this option is right for you:

Reverse Mortgage Pros

• Allows you to remain in your residence with no monthly mortgage payment.
• Requires no repayment for as long as you occupy the home and abide by the terms of the loan.*
• Enables you to supplement a fixed income and cover daily expenses.
• Allows you to use your equity however you choose.
• Does not subject you to additional income tax.
• Does not base eligibility upon your income or credit history.
• Will not cause you to be liable for any amount above your home's value.*
• Features interest rates that are comparable to traditional and home equity mortgage rates.
• Requires pre-loan counseling to ensure that you are well informed prior to making a decision.
• Protects you from excessive "junk" fees, due to heavy governmental regulation.
• Has no prepayment penalty.
• Allows you to finance your up front fees so that they are not paid out of pocket.

Reverse Mortgage Cons

• Can have higher up front fees than other types of financing.
• May reduce the amount of equity left to your heirs.
• Has the potential to impact need-based government assistance benefits.
• May become due and payable in full if certain terms of the mortgage are violated.
• Does not allow interest accrued to be deducted on taxes until the loan becomes due.
• Could prevent you from having equity to liquidate in the future.

*Homeowners are responsible for staying current on insurance, real estate taxes and property upkeep.