Should I Get a Reverse Mortgage?

Older couple at home
Photo by Andy Dean Photography / Shutterstock.com

People often ask me about reverse mortgages. A Money Talks News reader named Ebenezer puts it succinctly:

“What are the advantages and disadvantages of reverse mortgages?”

When I first started doing stories about reverse mortgages, I found them confusing. But once you understand the basics, they’re not hard to understand.

First, let’s explain what a reverse mortgage is.

A reverse mortgage is simply a mortgage: You’re borrowing money against your house. What makes a reverse mortgage different is that, instead of paying every month on your mortgage, you are getting money every month. You could also be taking money out as a lump sum, or using the mortgage to establish a line of credit.

In any case, a reverse mortgage is like any mortgage: You’re borrowing against your house.

Since you’re not paying on the mortgage, guess what’s happening to it? The interest is piling up, increasing the principal. In other words, your mortgage is getting bigger and bigger.

Who should — and should not — consider a reverse mortgage?

For starters, you have to be 62 to get a reverse mortgage. You also might be a good candidate for a reverse mortgage if you’ve got “more month than money.” If you’ve got a lot of equity in your house and Social Security just isn’t doing it for you, well, maybe this is a great way for you to increase your monthly income by tapping your home equity without leaving your home.

Keep in mind, however, that when you do leave your home, you’ve got to repay the loan.

Typically, reverse mortgage borrowers stay in their house for life. After their death, their estate sells the house and pays off the loan, or simply turns the house over to the lender. If the sale of the home isn’t enough to pay off the loan, that’s the lender’s problem. Once you’ve given up the house, your obligation is over.

Who’s not suitable for a reverse mortgage? People who want to leave their home to their kids. Remember, the mortgage is getting bigger and bigger. When you die, or when you move to a nursing home, etc., someone will have to pay off that mortgage if you want to keep the house in the family.

So to recap, a reverse mortgage is ideal for somebody who needs extra money and doesn’t really care about leaving the house to their heirs.

Things to know before you close

Before you close on a reverse mortgage, you’re going to be required to get counseling. This is a safety feature built into the law, so seniors don’t get ripped off. So here’s a final tip: Since you have to get counseling before you complete the process, why not get it before you begin the process? That way, you can understand the details and decide whether you want to get a reverse mortgage or not.

Counseling isn’t free, but it’s not expensive. You’ll often find it at nonprofit credit counseling agencies for $100 to $125. So, my suggestion for anyone thinking about a reverse mortgage is to first get the counseling. Ask your questions, understand it, and then you can be more informed and make the right decision.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Brace to Pay More for These 26 Prescriptions in 2020
Brace to Pay More for These 26 Prescriptions in 2020

More than 600 drugs — including these commonly prescribed meds — have seen price hikes so far this year.

5 Reasons You Should Work for as Long as You Live
5 Reasons You Should Work for as Long as You Live

These benefits might make you think twice about retirement.

The 13 Worst Types of Tickets for Your Car Insurance Rate
The 13 Worst Types of Tickets for Your Car Insurance Rate

Some types of traffic violations can drive your car insurance rate dramatically higher.

5 Ways to Put an End to Junk Mail
5 Ways to Put an End to Junk Mail

Here’s how to keep unwanted mail from clogging your mailbox and trash can.

This Grocery Store Is Cheaper Than Even Walmart
This Grocery Store Is Cheaper Than Even Walmart

One grocery chain is likely to save you more money than any other.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.