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Nov 29, 2022 · AARP has supported reverse mortgage products to help older Americans withdraw their home equity in retirement. While the organization does not offer reverse mortgages, it offers helpful information on this type of loan if you seek more information from an independent third party.
Apr 23, 2024 · Many people wonder if reverse mortgages are a good or bad idea. Depending on your unique situation as a senior homeowner, here are some benefits and disadvantages of reverse mortgages to consider.
- Joe Kimball
Sep 4, 2020 · File a complaint with HUD’s inspector general, online or by calling 800-347-3735. Contact your state attorney general’s office. Here’s how to protect your home’s value and prevent real estate scammers from stealing your home’s equity in a reverse mortgage scam.
- 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
Jun 17, 2024 · One major advantage of a reverse mortgage is that the money you gain is normally not taxed and won’t impact your Social Security or Medicare benefits. When Does a Reverse Mortgage Need to...
The table below summarizes the pros and cons. Potential Benefits. Potential Drawbacks. Source of cash. Risk of foreclosure. Option to use proceeds to pay off an existing mortgage. Fees and recurring costs. Ability to stay in your home. Reduced inheritance for family members. No income tax on proceeds. Impact on public benefits eligibility.
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How did AARP protect non-borrowing spouses' rights on reverse mortgages?
Oct 18, 2023 · Updated: October 18, 2023. Advertising & Editorial Disclosure. On This Page: A reverse mortgage is a loan that lets homeowners age 62 and older convert some of their home equity into cash. It pays you, unlike traditional mortgages, where you make payments to a lender.
