Yahoo Finance: Potential Pros and Cons of Reverse Mortgages


A reverse mortgage is a potential way for a senior 65 and older to use capital in their home to help meet their retirement financing goals, and can provide a viable option for those looking to increase their cash flow in life. on a fixed income. However, there are potential drawbacks that must be considered before entering into such a loan.

This is stated in a column published by GOBankingRates on Yahoo Finance. One thing that reverse mortgage professionals may find encouraging about this article is that it aims to contextualize reverse mortgages over other available tools, offering an unusually pragmatic view of the product category.

“Reverse mortgages can be a lifesaver for older people in financial difficulties, but they are not for everyone and involve risks and costs,” writes columnist Andrew Lisa. “A reverse mortgage is just another way for homeowners to use their capital. Like home equity loans, HELOCs and cash-back refinancing, reverse mortgages are home equity loans but are structured differently than the others. ”

In terms of potential benefits, the column continues to focus on use cases and how a reverse mortgage can improve a retiree’s financial situation.

“Seniors can use these specially structured loans to supplement their income, pay for health care and cover their expenses,” the column says. “Moreover, money is usually not taxed even if it is used as income. You retain ownership of the home and this does not affect your Social Security and Medicare benefits. Perhaps most important for safety-conscious seniors, you don’t need to refund money while you live in your home. ”

In terms of potential drawbacks, the column also continues to focus on the practical barriers that reverse mortgages can face when seeking to make a difference in their life situation, such as a loan that is payable if a resident decides to leave. The article also mentions relatively common concerns that some people share, including high upfront costs, rising loan balances over time, difficulties with spousal insolvency clauses, and more.

“If you die first, your spouse or your property will take over the bill for you, although in some cases a spouse who has no loans may stay in the house,” the column says. “However, even in these cases, the surviving spouse will no longer receive payments, since they were not in the loan. In many cases, the home is a property and the home must be sold in order to pay off the reverse mortgage. This is bad news for heirs who were expecting an unexpected inheritance. “

Read column at Yahoo Finance.

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