Reverse Mortgage Pros and Cons

Like most financial products, borrowers should proceed with caution

Satisfied reverse mortgage clients

A reverse mortgage can be a powerful tool for seniors struggling to make ends meet in retirement. That being said, it can also be damaging if used incorrectly.  The good thing about this products is that prior to receiving a loan an individual is required to receive counseling from a HECM (Home Equity Conversion Mortgage) counselor.  Your counselor will educate you about the process, what to expect, and answer any questions you may have.

This week’s Personal Finance 120 video (available here) provides an overview of reverse mortgages, so I recommend you review it as part of the learning process. What I wanted to focus on in today’s post is the pros and cons.  So, without further adieu:

Reverse Mortgage Pros:

  • Use funds to pay off existing debts (mortgage / credit cards)
  • Receive income based on your equity
  • Reverse mortgage funds are generally tax free
  • No restrictions on fund usage 

Reverse Mortgage Cons:

  • Product is a loan; therefore, interest will accrue
  • The loan will diminish the equity in your home
  • If you do not maintain taxes or insurance you run the risk of foreclosure.

Is a reverse mortgage for you?  It all depends. The best way to assess the product’s usefulness is to speak with a Reverse Mortgage Counselor.  Feel free to contact one of Cambridge’s counselors who would be happy to answer your questions – contact Cambridge.

Until Next time I’m Thom Fox for Cambridge Credit Counseling.

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About Cambridge Credit Counseling Corp.

Cambridge Credit Counseling Corp. offers its financial education to consumers throughout the United States. Our experienced staff is dedicated to helping people understand and manage their debts by providing personalized attention and a free, comprehensive review of each consumer’s financial situation. It is our objective that, as consumers become more educated about debt and the impact it can have on their lives, they can apply this knowledge to successfully manage their finances in the future.

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