Reverse Mortgage Pros and Cons: What You Should Know
Reverse mortgages can help older homeowners turn equity into income—but they’re not for everyone. Before you make a move, it’s important to weigh the pros and cons so you can decide if it’s the right fit.
Pro: Access to Tax-Free Cash
You get access to your home’s equity without selling or moving. Best of all, the money is generally tax-free since it’s considered a loan advance—not income.
Whether it’s a lump sum, monthly payout, or line of credit, it’s flexible and can help cover living costs, medical bills, or emergencies.
Pro: No Monthly Payments Required
One of the biggest perks? You don’t have to make monthly payments on the loan. It’s only due when you move, sell, or pass away.
This can ease financial pressure for retirees living on a fixed income.
Con: You’re Using Up Home Equity
As interest adds up over time, the amount you owe increases and your equity decreases. That means there may be less left for your heirs or for future housing needs.
If your home is a major part of your estate plan, this matters.
Con: Fees and Costs Can Be High
Reverse mortgages come with closing costs, mortgage insurance, and interest that gets added to your loan balance. This can make them more expensive than other loan options.
Always compare quotes and understand the full breakdown of fees.
Final Takeaway
A reverse mortgage can be a financial lifeline—or a burden. It all depends on your situation. Talk to a qualified expert and look at both sides before making your decision.