Reverse Mortgages---Pros and Cons

Real Estate Agent with Balboa Real Estate San Diego, CA



More than 600,00 Reverse Mortgages were issued between 1990 and 2010. What are they and what are the caveats?



 As of 2013 the number of seniors over 65 is 37 million and is expected to rise significantly over the next few years. Seniors 65+ will represent one fifth of the US population in 2030.


 In the past several years, many seniors have experienced erosion of their retirement portfolio, be that stocks, bonds, annuities or real estate. And for the first time in history, they are living the longest.



WHAT is a Reverse Mortgage:



A Reverse Mortgage is a a loan product that allows you to borrow against the equity in your home. You must be 62, and either have no mortgage ~or~ a small enough mortgage to be paid off from the proceeds of the RM. You must live in your home as your primary residence.


 RM loans are available in fixed and adjustable rates. You can take proceeds from the loan, a line of credit (similar to a HELOC) to be used as necessary to pay medical bills or other emergencies, or a monthly payment. You do not have to pay a monthly mortgage payment. You can use the product as a refinance, with or without cash out, since there are no income or credit qualifications. You still retain title, and you do not have to pay the RM back until you:



  1. sell the home

  2. pass away

  3. permanently relocate



Property taxes and insurance still need to be paid.


Traditionally, RM's were prohibitively expensive but theHECM SAVER LOAN

 charges only 0.01% of a home's value up front. Borrowing limits depend upon your age, the home's value and the interest rate.



Caveats include:



Moving out of the home without the intention to return (moving into a Nursing Home or other care facility for a year or more), the loan can be called.


A younger spouse married to an older spouse may be forced to move if the older spouse dies and the loan is not in the younger one's name.


Using up your equity by taking all the cash out at an early age and not having enough for your later years.


Not preserving equity for your heirs.



 These loans serve a particular niche, but may not be for everyone. But they may just help many seniors who have sufficient equity, limited options and really want to enjoy their golden years.






Posted by





Hogue and Belong Realty-Bankers Hill

San Diego, CA


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Gary Coles (International Referrals)
Venture Realty International - Las Vegas, NV
Latin America Real Estate

Deborah, Great post -- a very good explanation of a subject that is confusing to most people.  I encouraged my mom to take one and I think it will really work out well for her.  But as you said it is not for everyone.  

Hope things are going well for you.

Jun 07, 2013 08:43 AM #1
Balboa Real Estate San Diego, CA - San Diego, CA


In helping a friend with this product, I found out many things about it that are potentially quite beneficial to the owner. If you think like myself, I say --put extra $$ towards the Principal-----but for what? So that your heirs can reap the benefits of the equity while you scrimp and save in your Golden Years? It really has changed my thinking. EDUCATION is so important---because a Reverse Mortgage has proved to be a god-send to my client!

Jun 07, 2013 08:48 AM #2
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Deborah, I know that many seniors out there are a little confused about what a Reverse Mortgage is and how it can benefit them...great job explaining an RM. They aren't all that common place and I think I've only done one, but it worked well for that client.

Feb 27, 2015 04:48 AM #3
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