The Pros and Cons of It

As with any mortgage amount you would borrow, and a reverse mortgage is no different, make sure you consider the pros and cons carefully.

Pros

• You don’t have to make any payments.
• You can turn some of the value of your home into cash, without having to sell or move.
• The money 100% Tax Free.
• This money doesn’t affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits you may be getting.
• You still own your home.
• You have options as to when and how you receive the money.

Cons

• Interest rates are higher than other types of mortgages. Only slightly higher.
• The equity you hold in your home may go down as you accumulate interest on your loan. True. But the appreciation value of you home will generally outpace the interest.
• Your estate has to repay the loan and interest within a set period of time when you die. Usually within 1 year.
• The time needed to settle an estate may be longer than the time allowed to repay a reverse mtg. Usually 1 year.
• There may be less money in your estate to leave to your children. Naturally, as with any loan, your estate would  be minus the loan amount and interest that has been borrowed.
• Costs associated with a reverse mortgage may be higher than a regular mortgage. A reverse mortgage would have the same costs.

*My comments have been italicized.