Pros & Cons of Reverse Mortgage Home Loans

by | Nov 28, 2023 | Home Loan

So you’re considering a reverse mortgage on your home or property. Before you decide whether to move forward with a reverse mortgage home loan, let’s dive into the pros and cons of such a loan. Reverse mortgages definitely are a good option in specific situations. Before we dive into the details, the experts at MidCity Title do want to make it clear: a reverse mortgage is not free money.

A reverse mortgage is a loan option for properties where the owner can access funds tied to the value of the property. This is a loan option based on equity in the home and is typically utilized by older homeowners. Reverse mortgage home loans do not require monthly mortgage payments, but the loan does eventually need to be paid back.

PROS OF A REVERSE MORTGAGE:

  • Allows older homeowners to supplement expenses when in retirement
  • Homeowner maintains ownership of the property
  • Money from a reverse mortgage isn’t taxable as it’s considered “loan proceeds” by the Internal Revenue Service (IRS)
  • Amount of debt can never surpass the property fair market value

CONS OF A REVERSE MORTGAGE:

  • Reverse mortgage options do come with lender fees and closing costs – so make sure to take those expenses into account when deciding if this is the right option for you and your property
  • Interest accrued from this type of loan is not tax deductible
  • Taking out this type of loan may impact other programs like medicaid or supplemental security income (SSI) – make sure you fully understand how additional income can affect other benefits or programs you may be collecting
  • The reverse mortgage must be paid in full when the borrower is no longer residing in the property

Interested in learning more about reverse mortgages and if they’re a good option for you or a loved one? MidCity Title’s Reverse Mortgage Home Loan Services page goes into a ton of detail on the process and details.  Our team of title experts is also ready to answer more questions or talk about your situation specifically. You can get in touch with the MidCity Title team online or give us a call at 225-236-4252. We look forward to hearing for you and talking through your home loan options!