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What are the pros and cons of a reverse mortgage?

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The pros of a reverse mortgage include a supplementary income stream that helps seniors stay in their homes and handle emergency expenses, while cons include scams and less home equity, according to the National Council on Aging. Homeowners must meet many criteria, which can be a pro or a con.

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What are the pros and cons of a reverse mortgage?
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Full Answer

Criteria that people must meet for a reverse mortgage include being at least 62, owning the home completely or having a balance low enough for the loan to pay off and the financial ability to handle real estate taxes and homeowner's insurance, explains the U.S. Department of Housing and Urban Development. The people taking out the loan are also required to live in the home. One pro of reverse mortgages is homeowners do not pay a monthly mortgage and interest, and they have several options for the disbursement of the funds. For example, they can opt for equal payments every month as long as one person on the loan is alive and lives in the residence, or they may prefer a lump sum given to them at closing.

One con of a reverse mortgage is that it must be included in a comprehensive financial plan and is not best used as a last-minute fix, states the National Council on Aging. People who do not keep up the home or pay their property taxes or other ongoing expenses can also face foreclosure.

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