Reverse Mortgage Pros and Cons

Pros of Reverse Mortgages

• Provides flexible disbursement options (i.e. monthly or line of credit)

Calculate Your Eligibility

Age of homeowner Age 55 Age 56 Age 57 Age 58 Age 59 Age 60 Age 61 Age 62 Age 63 Age 64 Age 65 Age 66 Age 67 Age 68 Age 69 Age 70 Age 71 Age 72 Age 73 Age 74 Age 75 Age 76 Age 77 Age 78 Age 79 Age 80 Age 81 Age 82 Age 83 Age 84 Age 85 Age 86 Age 87 Age 88 Age 89 Age 90 Age 91 Age 92 Age 93 Age 94 Age 95 Age 96 Age 97 Age 98 Age 99

Home value $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000 $230,000 $240,000 $250,000 $260,000 $270,000 $280,000 $290,000 $300,000 $325,000 $350,000 $375,000 $400,000 $425,000 $450,000 $475,000 $500,000 $525,000 $550,000 $575,000 $600,000 $625,000 $650,000 $675,000 $700,000 $725,000 $750,000 $775,000 $800,000 $825,000 $850,000 $875,000 $900,000 $925,000 $950,000 $975,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,500,000+

Mortgage debt $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000 $230,000 $240,000 $250,000 $260,000 $270,000 $280,000 $290,000 $300,000 $325,000 $350,000 $375,000 $400,000 $425,000 $450,000 $475,000 $500,000 $525,000 $550,000 $575,000 $600,000 $625,000 $650,000 $675,000 $700,000 $725,000 $750,000 $775,000 $800,000 $825,000 $850,000 $875,000 $900,000 $925,000 $950,000 $975,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,500,000+
• Homeowner stays in the home without making monthly mortgage payments*
• Eliminate any existing mortgage
• Heirs are not personally liable if payoff balance exceeds home value
• Heirs inherit remaining home equity after paying off the reverse mortgage loan
• Proceeds are not considered income or otherwise, though you must continue to pay required property taxes**
• Interest rates may be lower than other options

Cons of Reverse Mortgages

• Value of estate inheritance may decrease over time as proceeds are spent and interest accrues on the loan balance
• Fees are typically higher than with a traditional mortgage, such as the following:
  • Upfront Mortgage Insurance Premium (UFMIP)***
  • Ongoing annual FHA mortgage insurance premiums of .5% of the outstanding mortgage balance
  • Loan origination fee
• Although a reverse mortgage loan generally does not affect eligibility for Social Security and Medicare, needs-based government programs such as Medicaid may be affected**
• Reverse mortgages are not well understood by many people

 

*You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.

**Generally, money received is not considered income and should be tax free, though you must continue to pay required property taxes. Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.

***Upfront Mortgage Insurance Premium (UFMIP) is based on a percentage of the Max Claim Amount. The Max Claim Amount (MCA) is based on the lesser of your home’s value, the current maximum lending limit set by the Federal Housing Administration (FHA), or the purchase price (if purchasing a new home).