Reverse Mortgage Disadvantages

1. No Interest write-off on your taxes:

a. You know that form you get each year that says you paid mortgage interest? Well it doesn’t come on most reverse mortgages. This is because you have not paid interest, you have just accrued interest. If you do pay the mortgage interest, you will get the write off, but that usually only happens upon the home being sold.

b. Is the write-off more important to you than the lack of house payments? Many would prefer the no house payments or the opportunity for increased income to getting the interest write-off.

2. Interest accruing or a balance getting bigger:

a. If you don’t make any payments on your loan and the lender is charging interest for that loan, your loan balance will grow. They just put the accrued interest on the end of the loan, adding it to your existing balance.

b. No payments today in trade for a bigger payoff tomorrow. Most reverse mortgages are paid off when the borrower passes away, so they have permanently deferred the monthly payments.

3.The reverse mortgage fees are expensive:

a. Reverse mortgages are traditionally expensive compared to a regular loan. The thing to consider is that on a regular loan you have to make payments and on a reverse loan, you don’t. I guess “they” feel the extra expense is justification for more fees.

b. With the development of new programs, you should be able to get a reverse mortgage for about half the prior cost. If the expense of the loan was the reason you didn’t do the loan before, check again. You should be pleasantly surprised on how in-expensive the fees are now.

4. Less money gets left to you kids:

a. Spending your equity will seemingly reduce the amount of inheritance that is left to your heirs. If you are one of many who wishes to leave a sum a money to your children or grandchildren, this is really important to you. there are probably other ways to leave an inheritance.

b. Are you really depriving anyone by spending your equity? If you have a mortgage, and you remove the monthly expense, this will leave you more cash to save or spend to maintain your independence. Your heirs may not have to chip in to help you survive. That alone saves them money and enhances their future retirement. If you have no mortgage, getting monthly income or a lump sum of money will help take care of your home and medical expenses.

These are examples of the so called disadvantages of a reverse mortgage. You can see that there are two sides to these arguments. So weigh the need against the objection and see if it makes sense to you. If you are looking for someone to bounce some ideas off of, feel free to give me a call or send me an email. You can get all of our contact information at along with more reverse mortgage information.

Have you heard other reverse mortgage disadvantages? Follow the links if you are looking for more information on reverse mortgages. You can get a free education with no obligation. You can even use our free reverse mortgage calculator.

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