Many older adults have found that the money they’ve worked years to save still doesn’t cover the rising costs of retirement. Instead, they’re living on fixed incomes, with more stress, just as their golden years are getting in full swing.
You don’t have to be one of them. Get a reverse mortgage, and turn your home’s equity into steady tax-free income you can count on, control and keep for as long as you live in your home. It’s a safe, secure tool for homeowners looking to retain their financial independence and maintain their quality of life as they grow older.
You can find top reverse mortgage lenders on LendingTree’s® marketplace. But, before you start shopping, check out this list of reverse mortgage pros and cons. Make sure you’re making the best, smartest financial decision for this meaningful time in your life.
Pro: No more monthly mortgage payments
Because it’s generated from your home equity, a reverse mortgage eliminates your monthly mortgage payments. Instead, you receive payments for as long as you live in your home.
Con: There are restrictions
Not every senior citizen gets a reverse mortgage. To qualify, you must be age 62 or older, use your home as your primary residence, own your home fully or have at least 50 percent equity in the home and make sure you’re not delinquent on any federal debt or loans.
Pro: You choose how you get paid
Reverse mortgages come with payment options. You can choose to get your payouts in a lump sum, monthly installments, a line of credit or in a combination of all three!
Con: There are (more) costs to consider
A reverse mortgage is still a home loan. Just like with a traditional mortgage, you’ll have to pay lender fees, closing costs, insurance premiums and other charges associated with getting a home. You’ll also need to pay ongoing costs associated with homeownership, such as property taxes, repair and maintenance costs and even HOA fees.
Pro: Your home is yours, not the bank’s
You still own your home. The lender won’t foreclose on it as long as you meet the requirements of the reverse mortgage, such as using your home as your primary residence. You don’t have to repay your loan until you move, sell your home, pass away or otherwise no longer live there.
Con: Your money could be set aside
If the lender determines you’re unable to afford the costs of homeownership, it may set aside a portion of your reverse mortgage payout to cover those expenses. It’s called a life expectancy set aside and will reduce the amount of loan proceeds you receive.
Pro: They’re safer than ever
Years ago, predatory lenders used reverse mortgages to swindle the elderly. Times have changed. Most reverse mortgages today are home equity conversion mortgages (or HECMs) backed by the Federal Housing Administration. They come with lower interest rates, several payment options and access to a mortgage counselor who guides you through the process.
Con: Lenders can still foreclose on your home
Lenders can seize your home if it loses its primary residence status. How does that happen? If you live away from your home longer than six months for non-medical reasons and 12 months for medical ones, lenders determine your home is no longer your primary one.
Pro: It’s your money. Use it how you want.
There’s no limit on how you can use money from your reverse mortgages. It’s all yours, no strings attached. Pay off lingering bills. Build your emergency fund. Take the grandkids on the best summer vacation ever. Whatever you decide, we recommend you do it responsibly.
How do I get started?
Visit LendingTree® to get matched with a reverse mortgage lender with your best interests at heart. Find the best rates and fees for your lifestyle, and begin your journey to a stress-free, financially stable retirement.