Pros and cons of reverse mortgage

Pros and cons of reverse mortgage

From Mathew Philip

I'm raising money for a cause I care about, but I need your help to reach my goal! Please become a supporter to follow my progress and share with your friends.

Support this campaign

Subscribe to follow campaign updates!

More Info

There’s a good chance you’ve heard of a reverse mortgage from somewhere, could be online or maybe your friend pitched the idea to you. The idea behind it is quite simple to understand—rather than getting a home loan and making payments to the lender which can be stressful if not managed properly, the lender makes payments to you. These payments can either be a lump sum or a monthly payment. Either way, loan repayment is not required until you pass on or move out of the house or sell the house.

However, even though a reverse mortgage feels like free money, it’s actually a loan. Interest, service fees, and mortgage insurance will all be assessed and added to the loan balance. Over time, those costs can add up significantly or probably decrease depending on the situation of interest rate and a few other factors that may affect the price. Therefore, before you make any decision based on this life changing decision, here’s what you need to know about reverse mortgage interest calculator canada pros and cons.

Pros of reverse mortgage

As long as you remain in the home and don’t die or sell the house, using it as your primary residence, you can receive regular income during retirement to help sustain yourself. For some retirees, who struggle to meet their living expenses, this can be a big help. With a reverse mortgage in place, you can choose to receive equal payments for the remainder of your life—or as long as you live in the home. Alternatively, you can decide to get those payments for a set period which ever suits you better.

When you’re working out how to manage retirement income in a tax-efficient manner, a reverse mortgage can help. You won’t have to pay taxes on the money you receive in payments from the lender. This is why a lot of people consider this.

Repayment of the reverse mortgage will only be required when the home is no longer your primary residence, you sell the home or you die. Either way you can’t be forced into early payment until one of the following happens.

Cons of reverse mortgage

If you want a reverse mortgage insured through the FHA, the youngest borrower needs to be 62. For those with younger spouses, this can derail the reverse mortgage process and you won’t be able to procure your funds.

If you want to pass your home on to your children or other heirs, it might not be possible if your estate doesn’t have enough in assets to pay off the loan. Once you die, the loan becomes due. If your heirs can’t figure out a way to pay off the loan using other resources, they’ll have to sell it.

Campaign Wall

Join the Conversation

Sign in with your Facebook account or