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Should You Get a Reverse Mortgage?
At a time when many Baby Boomers are approaching their retirement years with grave concerns over their income sources, the late night pitches for reverse mortgages may look quite appealing to some. As with any financial strategy, especially those that involve the equity in your home, they should be carefully weighed against your needs, concerns, and priorities. For the right situation, reverse mortgages may have their advantages. But, the disadvantages are many, so, with the limited space available for this article, they are covered here.
Five Disadvantages of Reverse Mortgages
- They increase debt - you may be tapping your equity but it is still a debt to be paid
- They aren’t Inexpensive – loaded with closing costs and fees
- They limit your legacy – lender has the first lien and the kids get what’s left over
- They can be a financial assistance disqualifier – income from a reverse mortgage may preclude you from receiving state or federal assistance if you should ever need it.
- Forget your moving plans – you’re locked into your home
Unquestionably, reverse mortgages can be beneficial in certain situations, and no one can be faulted with wanting to benefit from an asset that took decades to pay for. But, many people fail to thoroughly consider the consequences of reverse mortgages, and once they are established, they are not easily reversed.