GOBankingRates works with many financial advertisers to showcase their products and services to our audiences.
These brands compensate us to advertise their products in ads across our site.
This compensation may impact how and where products appear on this site.
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information.
you’ve got the option to read more about oureditorial guidelinesand our products and servicesreview methodology.
This shows that reversemortgagesare popular among seniors looking to supplement their income.
Instead of making mortgage payments, lenders loan borrowers money.
Sounds like a great idea.
If you want to take a reverse mortgage, you better be very cautious.
Its best to be informed before doing a reverse mortgage.
Here are fourreasons to think twice before getting a reverse mortgage.
When your home loses value, it forces a Deed-in-Lieu of Foreclosure.
Its a common thing when homeowners take reverse mortgages.
Realtors are always advising homeowners against HECM loans.
I understand the appeal of reverse mortgages for seniors, especially those that are cash strapped.
Muck also noted how these accumulating interest rates can quickly eat away at the homeowners equity.
He highly recommends against taking a reverse mortgage.
You Are Not Relieved of Financial Obligations
Yes, a reverse mortgage does have some tax benefits.
The IRS recognizes HECM as a loan, which means no income and, therefore, no tax.
But youre still financially obligated to pay for the house.
They still must cover property taxes, homeowners insurance, and maintenance, said Muck.
Failing to pay for these requirements will result in a Deed-in-Lieu of Foreclosure.
While the cash loan is handy, the extra payments must come out of your pocket.
Youll compound the interest rates as you lose your homes equity.
Heirs often have around 6 months to satisfy a reverse mortgage.
Their likely option is simply signing the home over to the bank.
The income from a reverse mortgage may be considered a countable asset.
Being elderly, your health and that extra income are things you dont want to gamble with.
Talk this out with your financial advisor before taking a reverse mortgage.
More From GOBankingRates
Share This Article:
