Reverse Mortgages 101

There are many potential downsides to using a Reverse Mortgage to be considered before signing on the dotted line:

• Your home is likely to be valued conservatively. The mortgage could be based on less than what your home is really worth.
• You will still be responsible to pay property taxes, homeowners insurance, and keep up the house. 
  • If you do not keep up with the payments, there could be a foreclosure on the house.
  • NOTE: You can set aside part of the proceeds to pay the taxes, insurance premiums and maintenance
• You can lose out on the home's appreciation if the lender eventually takes title to it.
• As the equity in your home decreases, there is less money available for emergency purposes.
• If you obtain a Reverse Mortgage and then change your mind, it may be difficult to repay the loan because the amount of the debt increases quickly. Interest compounds upon interest during the life of the loan.
• You may use up all of your equity and have nothing left for later years.
• The high cost of obtaining a Reverse mortgage. See the next section.

NOTE: If your spouse/partner is not named on the mortgage, he or she could lose the house upon your death. Both spouses should be named on the mortgage.

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