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Reverse Mortgage Disadvantages & Myths

  1. Reverse mortgages allow you to tap into your homes equity, but effective money management is crucial. While reverse mortgages eliminate monthly fees, banks are still in the business of making money. With this in mind, your priority should be to use the money how you want it, but remember that prudent money management is important.

  2. An unfortunate reality of a reverse mortgage is equity deduction in your estate. Luckily, you have control over how much. In relation to the value of your home, the smaller your outstanding loan balance, the smaller the reduction in your home equity.

  3. The loan amount that you receive will not be equal to the total value of your home. However, borrowers are given the power to decide how they get there funding. These options include a lump sum, monthly tenure, or line of credit payment.

  4. Reverse mortgages are essentially a “kick start” to your financial aspirations, but are not an endless supply of income. Once the money is used, it is gone forever. However, in the event that your home appreciates, you can refinance your reverse mortgage and get further funding.

  5. When considering a reverse mortgage, understanding what you are buying and who you are buying it from are equally important. Sales people sometimes have alternative motives, so research your mortgage lender on the Better Business Bureau (BBB.org) website to protect yourself and delineate cost and quality.