Pros & Cons

Pros

  • Allows the homeowner to stay in the home.
  • Can pay off existing mortgages on the home.
  • Simple to qualify for because no minimum credit score and generally no income requirements.
  • No monthly mortgage payments are due for as long as the homeowner lives in the home and meets eligibility requirements for maintenance and paying property taxes and insurance.
  • The homeowner can receive payments on flexible terms:
    • Credit line for emergencies
    • Monthly payments
    • Lump sum distribution
    • Any combination of the above
  • A reverse mortgage can not get “upside down” so the heirs will never be personally liable for more than the home is sold for.
  • Heirs inherit the home and keep any remaining equity after the balance of the reverse mortgage is paid off.
  • Loan proceeds are not taxable.
  • The interest rate may be lower than traditional mortgages and home equity loans.

Cons

  • The fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage because of the insurance cost. The largest costs are:
    • FHA mortgage insurance
    • Origination fee
  • The loan balance gets larger over time and the value of the estate/inheritance may decrease over time.
  • Although Social Security and Medicare are not affected, Medicaid and other need-based government assistance can be affected if too much funds are withdrawn (and not spent) in one month.
  • The program is not well understood by most individuals. However, the availability of independent reverse mortgage counseling helps.

Info – © 2017 American Pacific Mortgage Corporation. All information contained herein is for informational purposes only and, while every effort has been made to insure accuracy, no guarantee is expressed or implied. Any programs shown do not demonstrate all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions apply. Equal Housing Opportunity.”

Reverse Mortgage – Reverse mortgages are loans offered to homeowners who are 62 or older who have equity in their homes. The loan programs allow borrowers to defer payment on the loans until they pass away, sell the home, or move out. Homeowners, however, remain responsible for the payment of taxes, insurance, maintenance, and other items. Nonpayment of these items can lead to a default under the loan terms and ultimate loss of the home. FHA insured reverse mortgages have an up front and ongoing cost; ask your loan officer for details. These materials are not from, nor approved by HUD, FHA, or any governing agency.