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Pros include: No monthly mortgage payments. Allows you to stay in your home while accessing its equity. The loan proceeds are generally tax-free. Cons, on the other hand, include: Fees and other costs can be high. Might impact your estate and inheritance. May affect your eligibility for means-tested government benefits.
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Jul 31, 2023 · Explore the intricacies of reverse mortgages in California in this comprehensive guide. Learn what a reverse mortgage is, eligibility requirements, and how it can impact your estate planning. Weigh the pros and cons to make an informed decision about this important financial tool.
May 22, 2024 · Reverse Mortgages: Pros and Cons Reverse mortgages can be a good way to shore up retirement income, but costs can outweigh benefits for some. By Claire Tsosie
Apr 1, 2024 · Learn more about the pros and cons of reverse mortgages, including the typical criteria to get one. Key Takeaways A reverse mortgage lets you convert some of your home equity into...
- Reverse Mortgage Pros
- Reverse Mortgage Cons
- Who Is A Good Candidate For A Reverse Mortgage?
- Who Is A Bad Candidate For A Reverse Mortgage?
- Should You Get A Reverse Mortgage?
You can better manage expenses in retirement
Many seniors experience a significant income reduction when they retire. A reverse mortgage allows you to supplement that diminished income without digging into savings. You don’t have to make monthly payments, either, which could help free up room in your monthly budget.
You don’t have to move
Instead of leaving your home, a reverse mortgage allows you to age in place. Additionally, while a reverse mortgage comes with fees and other costs, it might cost less in the long run than buying another home or renting in a new location.
You don’t have to pay taxes on the income
The money you get from a reverse mortgage isn’t taxable because the IRS considers it “loan proceeds,” not income. (However, it could be considered income by other agencies — more on that below.)
You have to pay fees
Reverse mortgages come with fees, including: 1. Origination fee (capped at $6,000 for HECMs) 2. Mortgage insurance premiums (MIP) 3. Closing costsfrom third parties, such as an appraisal fee or recording fee 4. Monthly servicing fee up to $35 Many of these expenses can be rolled into the loan principal; however, that can substantially increase the amount you owe.
You can’t deduct the interest until you repay
You might have enjoyed the mortgage interest deductionon your taxes when you were paying off your mortgage, but you won’t be able to deduct the interest on a reverse mortgage each year. You’ll only enjoy that perk when the loan is paid in full.
You could inadvertently violate other program requirements
A reverse mortgage could cause you to violate asset or income restrictions for the Medicaid and Supplemental Security Income (SSI) programs. This might affect your eligibility for these benefits.
With all the potential complexities and risk, is a reverse mortgage a good idea? For some homeowners, the answer might be yes if: 1. You anticipate staying in your home for a long time– Since you’ll pay another set of closing costs with a reverse mortgage, ideally, you’ll want to stay in the home long enough to break even on the expense. If you’re ...
Here are a few signs that a reverse mortgage isn’t right for you: 1. You’re planning to move– Remember: You’ll want a long runway to make paying all the closing costs, mortgage insurance premiums and other fees worth it. 2. You might need to move due to health issues– A reverse mortgage requires you to live in the home, which means that relocating ...
Reverse mortgages have gained a reputation thanks to some scams that target unsuspecting seniors. Even legitimate companies have used dishonest marketing to try to get homeowners to take out reverse mortgages. The simple rule is: Be very cautious about putting your home at risk. Still, there’s at least one key reason you might consider a reverse mo...
- Peter G. Miller
Jul 18, 2022 · Updated on: July 18, 2022. Why use LendingTree? A reverse mortgage is a special type of home loan that allows older homeowners with significant equity — at least 50% — to borrow against their home’s value without making any monthly payments.
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Is a reverse mortgage right for You?
Pros and Cons of a Reverse Mortgage in California. Exploring Both the Benefits and Negatives of a California Reverse Mortgage. Navigating Reverse Mortgage Pros and Cons: A Deep Dive. presented by John Correll, CRMP. Certified Reverse Mortgage Professional in California. Considering a reverse mortgage can be a big decision.
