At a time when the economy is still struggling and more seniors are retiring than ever before, people are looking in a directions trying to bridge financial gaps and make ends meet. Seniors have a relatively new option available to them by way of a reverse mortgage, but what are the advantages? Many seniors feel that these reverse mortgages look quite appealing, so let’s get down to the pros and cons.

One thing seniors hear about right away just by hearing a commercial for reverse mortgages is that they would still get to live in their home. In fact, they still own the home if taking out a reverse mortgage. Also, when taking out one of these mortgages, you do need equity built up, and you’re only borrowing against a portion of that equity. Many seniors do have equity or even own their homes outright, so that can be quite a significant amount of money coming their way.


Let’s say you decide to take out a reverse mortgage for 75,000 dollars based on the equity you have in your home. Obviously, borrowing that money means it has to be paid back if the home is to be kept. People who take out reverse mortgages aren’t doing so because they plan on having money later to pay back the loan. So what happens? What do you need to know?

You would have a 75,000 dollar reverse mortgage, providing you with funds to live on, and then you would still have your home at its current value. Do you have to pay property taxes? Yes you do, and you have to pay insurance and are responsible for making any repairs to the home yourself. As the years go by, the 75000 dollars isn’t the balance on the reverse mortgage anymore. In fact, it is going to grow.

Interest accrues on that loan, and make no mistake about it, it is set up as a loan or a mortgage as named. So does the reverse mortgage balance just grow and grow? Yes it does, and any heirs that want to keep the home have to pay back the entire balance including interest. What if the home you left your heirs had a balance on the reverse mortgage that was as much as the actual value of the home?

Stuart Miles/

That would be like you really aren’t leaving the home to your heirs. That being said, the reverse mortgage can still make sense if you need the money for retirement and don’t need to leave the home you own to anyone. After all, you can’t take it with you. You have to think about how much money you’re getting for your home though in comparison to what it is worth. You have to think about how much you want to borrow, too.

Could you just sell your home instead if you don’t want to leave it to someone? Yes you can, but remember that means you no longer own the home and would need to live somewhere else. Plus, it can take awhile to sell a home. You have to decide if you need this money for retirement and how a reverse mortgage can help. Is it the route you want to take? Each senior’s situation is different, and you have to decide what needs to happen for you.

It could be that you are just looking into reverse mortgages to see if they make sense for your financial situation. That is the approach that you want to take. Also remember that there are different companies that offer these mortgages and different rates as well.