I meet with senior homeowners that are thinking about getting a reverse mortgage. “Is this a wise course of action for my situation?” Could the federal government take my home? With a reverse mortgage the lending company receives the home, not my loved ones, after I pass away, correct? Those are excellent questions that all have answers. There are all kinds of good and bad points in every decision. Making a decision about a reverse mortgage is no different. In order to assist you in your fact gathering quest I have included a ton of information for you.

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Benefits of Reverse Mortgages: (also called HECM – heck-uhm)
Increase your monthly cash flow for life or for a specified term. You can learn more about reverse mortgage equity loansĀ  here.
You’re not stuck with the decision you initially make. You can make modifications to the way you get equity from your home at any time, assuming equity remains. The remainder of the Line of credit increases each month at 1.25% over the current interest rates. A great choice for baby boomers who wish to remain in familiar surroundings and in the same area where they have resided for years.
Moving can cause psychological problems for a lot of older home owners. Memories were created within your “home sweet home”, and close proximity to loved ones and residing in your town could be a more sensible choice.
You do not have to own you home free and clear to qualify for a reverse mortgage. Commonly, the only out of pocket costs you will have are the HUD counseling fee and the appraisal. But additional fees may apply depending upon the situation and type of property.
You can not be evicted from your home as long as you are abiding by the agreement in the contract. Mainly these agreements include maintaining your home and paying your taxes, insurance and HOA dues.
You are able to refinance out of the reverse mortgage right into a traditional loan presuming you meet the requirements and there is equity in your home.
Neither you, your estate or your heirs can ever owe any more than the value of the home.
This is what is referred to as a non-recourse loan. In other words, you have no personal responsibility for this loan, neither does your estate or your heirs.
Reverse Mortgages have numerous safeguards: capped mortgage rates, a limitation on fees, HUD counseling, asset protection (non-recourse loan), no maturation date (cannot become due during a homeowner’s lifetime).
Could be a financial tool to help beneficiaries avoid a portion of the real estate tax.
Your beneficiaries could possibly claim the interest from your mortgage on their income taxes after your passing. (Be sure to consult your income tax advisor for advice.)

Now, those are the pros. Super simple, no? Sure, the dutiful old loan officer always gives you the good parts, but there are some things that may be drawbacks to Reverse Mortgages. Here are the cons:

The CONS of Reverse Mortgages:
They can and quite often are higher in price than a conventional loan. However, you should not really compare them as they are very different loan products.
A Reverse Mortgage can reduce your kid’s and grandchildren’s inheritance. A Reverse Mortgage really is a growing debt loan because you are not making mortgage payments. It’s the opposite of a conventional home loan where equity will increase as mortgage payments are paid.
You’ll typically net more cash from the sale of your home than you’ll with a reverse mortgage.
Moving out of your house in less than 5 years makes a Reverse Mortgage unwise. It doesn’t make good sense to use a Reverse Mortgage short term.
In the event that you don’t pay your taxes or insurance the lender may foreclose on your property.
If you are not residing in your main home for a period surpassing 12 continuous months, the Reverse Mortgage will become due. (Assisted living facilities, assisted living, moving, etc.)
You may not qualify for needs based programs and support such as Medicaid.

When NOT to get yourself a Reverse Mortgage:
If you happen to just need temporary access to cash and equity.
{In the event your primary intention is upgrading your home, a community gift may work much better.|In the event you just need to add a roof, windows or other energy efficient options. If that is the case, subsidies and assistance may be available. Go here for more reverse mortgage information.
If you know you’re going to be moving into an assisted living facility in the very near future.
If your family says you should not get a reverse mortgage, listen to them and have a meaningful discussion with them and the loan officer, together.
If your children invite you to move in with them, this can be the optimal option to residing in your own home.
If you are using the home for agriculture.