Pros and Cons of Reverse Mortgages

Among the many options overlooked by homeowners, one of the most commonly overlooked is a reversed mortgage. A reverse mortgage is a system that allows homeowners to borrow against their own home equity while still being the homeowner. A reverse mortgage can be a powerful tool for retirees seeking a higher income to live comfortably. Though it can be a fantastic resource, a reverse mortgage has its pros and cons, like any financial option. Below are pros and cons of reverse mortgages:


  1. Homeowner Stays at Home

With a reverse mortgage, a homeowner is able to remain living in the house, rather than uprooting and starting over elsewhere.

2. Medicare and Social Security Remain Unaffected

A big worry from many who consider reverse mortgages is the idea that their other sources of income or aid will be affected by the reverse mortgage payouts. The good news is that in many circumstances, Medicare and Social Security remain unaffected. Those benefits remain intact as they enjoy the added benefit of reverse mortgage payments.

3. Reliable Source of Income

Those seeking a reverse mortgage could stand to gain a reliable source of income by using their home equity as leverage. The payments can often be requested as a lump sum or as a structured, regular payment.


  1. No Fixed Rates

Much like a mortgage, a reverse mortgage can have a variable rate over time. This means that the value of the home may drop quicker overtime if not closely monitored.

2. Inheritance

If the person taking out the reverse mortgage is considering leaving their home to an heir, such as a child or grandchild, those heirs will not be able to keep the home unless the loan is repaid.

3. Cost of Entry

A major stumbling block for many, applying for a reverse mortgage can be very expensive. In many cases, lenders will charge high closing costs as well as origination fees. While in many cases these can be manageable, the high startup cost is often a prohibitive factor for some.

4. Difficulty Understanding

Reverse mortgages can be difficult for a person to understand. There is a lot of legal terminology and hefty paperwork that can very easily be overlooked. In many cases, those who apple for a reverse mortgage are too shy to ask about specific details. The failure to fully understand the terms of the reverse mortgage can make for a difficult situation later on.

If you or a loved one is considering a reverse mortgage to live more comfortably in retirement, it pays to have an experienced real estate lawyer who could help. Contact Joel R. Spivack today to schedule a case consultation to discuss your options. Call 856-488-1200 or contact online.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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