The Reverse Mortgage Issues No One Is Talking About


While watching television over the past week, I was struck by how many commercials I saw advertising reverse mortgages to seniors. On just about every channel I watched, there was a commercial showing seniors how financially beneficial a reverse mortgage could be and generally glossing over any downsides to the transactions. To me, it seemed like an offer that was too good to be true. I was sure that there had to be some issues occurring with reverse mortgages that no one was talking about. After a bit of research, I discovered that I was right.

You Could Lose Your Home

A reverse mortgage is a type of loan that allows older homeowners to borrow against the accrued equity in their homes and use that money as income during their retirement years. According to the National Reverse Mortgage Lenders Association, more than 51,000 homeowners secured reverse mortgage loans from the Federal Housing Administration (FHA) in fiscal year 2014. Most of the commercials that I viewed for the reverse mortgages contained reassurances that the senior would be able to keep their home and that they would be able to live in their home as long as they liked. This was true…to a point.

Some seniors are at high risk of losing their homes after signing up for a reverse mortgage, often because they don’t have enough money to pay the homeowners insurance and property taxes for the home. The senior can also be in default on the loan if they fail to make necessary repairs in a timely manner. If the senior fails to meet all of the requirements of the loan, they must either pay back the loan amount immediately – which is unlikely if they are already facing financial difficulty – or they must give up the home to the lender.

You Could Outlive The Loan

Today, seniors are living longer than ever before, lengthening the amount of time that they need to stretch their retirement savings. A reverse mortgage looks like an easy, risk-free way of getting some additional money for your expenses during your retirement years, but the money is not guaranteed for the life of the homeowner. If the loan is obtained too early, then there won’t be any money left from the loan in the person’s later years, when they may need it the most. Worse, the home’s equity has been drained off by this point, leaving seniors with few options for continuing to fund their retirement.

The Fees and Interest On The Loans Are Substantial

Many people fail to understand that a reverse mortgage is a loan that has fees and interest rates associated with them to make money for the lender…just like every other loan in existence. The word “loan” is used sparingly in commercials for reverse mortgages because the companies don’t want you to think about how much you are going to pay for the reverse mortgage. They only want you to think about how much money you would get. Instead of a windfall, a reverse mortgage is more like a personal loan with your house as collateral if you, or your children, cannot pay back the loan in full.

Join our newsletter


Subscribe to get the latest "Engineer Your Finances" content via email.

Powered by ConvertKit
About the author

Join our newsletter

Subscribe to get the latest "Engineer Your Finances" content via email.

Powered by ConvertKit Top Finance Blogs


SSCP   CAS-002   9L0-066   350-050   642-999   220-801   74-678   642-732   400-051   ICGB   c2010-652   70-413   101-400   220-902   350-080   210-260   70-246   1Z0-144   3002   AWS-SYSOPS   70-347   PEGACPBA71V1   220-901   70-534   LX0-104   070-461   HP0-S42   1Z0-061   000-105   70-486   70-177   N10-006   500-260   640-692   70-980   CISM   VCP550   70-532   200-101   000-080   PR000041   2V0-621   70-411   352-001   70-480   70-461   ICBB   000-089   70-410   350-029   1Z0-060   2V0-620   210-065   70-463   70-483   CRISC   MB6-703   1z0-808   220-802   ITILFND   1Z0-804   LX0-103   MB2-704   210-060   101   200-310   640-911   200-120   EX300   300-209   1Z0-803   350-001   400-201   9L0-012   70-488   JN0-102   640-916   70-270   100-101   MB5-705   JK0-022   350-060   300-320   1z0-434   350-018   400-101   350-030   000-106   ADM-201   300-135   300-208   EX200   PMP   NSE4   1Z0-051   c2010-657   C_TFIN52_66   300-115   70-417   9A0-385   70-243   300-075   70-487   NS0-157   MB2-707   70-533   CAP   OG0-093   M70-101   300-070   102-400   JN0-360   SY0-401   000-017   300-206   CCA-500   70-412   2V0-621D   70-178   810-403   70-462   OG0-091   1V0-601   200-355   000-104   700-501   70-346   CISSP   300-101   1Y0-201   200-125  , 200-125  , 100-105  , 100-105  , 1Z0-803  , 400-051   EX300  , CISM   100-105  , 000-106   400-201   642-732   220-902   70-410  , MB6-703   810-403   70-243  , CAS-002  , AWS-SYSOPS   70-462   70-410   2V0-621   LX0-103   70-461  , 220-902   1Z0-144   70-178   70-270   350-080  , 1Y0-201   1z0-808  , NSE4   102-400  , ADM-201   SSCP  , 200-125  , 640-911   000-104   640-692   300-320   350-060   000-089  , 000-017   1z0-808   700-501   1Z0-051  , 70-177   M70-101   300-209   70-461   3002   N10-006   VCP550   70-487   300-320  , 3002   700-501   NS0-157  , 1V0-601   CAS-002