What Are The Disadvantages Of Reversing A Mortgage

A reverse mortgage is a retirement strategy implemented for those aged 62 and above, which will allow them to have access to a cash payment in exchange for home equity. What distinguishes it from the traditional mortgage or loan is that you do not have to make a monthly payment. Also, the repayment of a reverse mortgage is only due when the borrower moves out of the house permanently or dies.

There are several types of reverse mortgages, and some of the popular ones include home equity conversion mortgages, HECMs, single-purpose mortgage, and proprietary conversion mortgages.

Certain factors are also considered before anyone can be considered to receive a reverse mortgage. The borrower must: 

  • Be 62 years and above.
  • Have a low or no mortgage loan balance
  • Reside in the home
  • Have no federal debts such as income taxes or student loans
  • Must be willing to pay for closing costs
  • Must be ready and able to attend U.S. Department of Housing and Urban Development mortgage counseling

With all of these in mind, you might be ready to take a reverse loan; however, there are many downsides to reverse loan collection and payment, some of which are considered below:


Due to the high value of a reverse mortgage loan, you may become tempted to use the money collected for other purposes. Some reverse mortgage sellers can even convince you to use it to the renovation of your home or other financial-related tasks. This is not why this mortgage loan option is created, and if you choose to use it for other purposes, you might exhaust it earlier than expected.


The fact that you do not have to pay back reverse mortgage monthly does not mean you will not have other payments you need to settle. For instance, you will need to pay your property taxes, HOA fees, and other home maintenance cost. If you fail to make these payments, you might lose your home to foreclosure earlier than you think.


You do not have to pay the reverse mortgage loan back unless you leave the house permanently or die; then, your heir can make the payment. This is indirectly placing some debt on your children, and if your child is unwilling to make the payment, you will lose your property because the house will be turned over to the government.


Legal issues can occur if you have more than one spouse while you were alive. The person saddled with the responsibility of making the payment can become an issue, and if no one is willing to pay, the fact that you might lose your house can lead to arguments among your spouses and children. This will automatically translate to taking several legal actions, which can be stressful and expensive. 


Before deciding to take a reverse mortgage loan, you need to be sure you have put everything in place. The need to enjoy your retirement years should not be detrimental to your heir or anyone in charge of the finances after you are gone.


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