Reverse Mortgages Part 3

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March 2, 2018
Reverse Mortgages Part 3

Image Copyright Ted Grussing Photography – Used with permission

Today we are going to continue our series on Reverse Mortgages and if one may be appropriate for you!

When considering a reverse mortgage, it’s important to remember that there are pros and cons to taking one. Today we would like to wrap up our series with a review of what we consider the most important points to think on before signing up for a reverse mortgage.


  • The interest compounds monthly not annually, which means it will add up extremely quickly.
  • If you want to leave your house to heirs they will have to pay the entire balance of the loan. If they cannot pay the loan, they will not inherit that asset from you.
  • Eligibility for needs based government programs such as SSI may be affected – and you will need to do your research to see if that is the case for you.
  • The loan becomes due in full when a “maturity event” occurs. Maturity events could be:
    • Death of the borrower
    • The home is no longer the borrower’s principle residence
    • The borrower vacates the home for more than 12 months (this could mean entering an assisted living or nursing facility).
    • Also, if taxes and insurance are not paid for the property, the loan will come due
  • The bank has the right to sell the property if it is deemed to not be well maintained. (Consider a future where your health may not allow you to maintain your home as you are now and consider whether you will have the funds to pay for maintenance costs)
  • Interest charged for reverse mortgages is usually quite substantial, but is not deductible until the payoff off of the loan.

Remember, reverse mortgages are not so heavily marketed just because the banks want to help you out… The bank will be responsible for selling the house to recoup their money and as the loans are structured now, most will make quite a profit on your house loan.

In closing, reverse mortgages may be the answer for you if you have no one you want to leave your house to. They can be the perfect answer, just make sure you know all of the facts. Discuss with people and professionals you know and trust who have experience you may not have in deciphering the many aspects of these loans.

Have a great weekend!

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Pros and Cons. (n.d.). Retrieved from