- With interest rates still relatively low and housing prices very high, borrowers can tap an average of close to 60% of their home equity on very good terms as either a lump sum, monthly payments or as a line of credit that carries interest only on withdrawals.
- Reverse mortgages are non-recourse loans. As long as you pay property taxes and maintenance expenses, you can stay in the house as long as you like and the terms won’t change, regardless of the housing market or changes in prevailing interest rates. The loan is due when you die or leave the home.
- A reverse mortgage line of credit provides flexibility in managing the distribution of retirement benefits. It allows a borrower to take tax-free withdrawals on the credit line rather than sell investments (and pay taxes) after a drop in the market.
- It is easier to qualify for a reverse mortgage, but they are more costly than other mortgages and home equity lines of credit. If for health or any other reason, you don’t stay in the house for long, the costs will seem even higher.
- If you use the proceeds of a reverse mortgage for questionable spending or risky investing, you’re setting yourself up for financial ruin. If it represents a last resort for funds, you are probably living an unsustainable lifestyle. “The better option is to downsize your home and reduce your spending,” said Hook of EKS Associates.
- Homeowners are still required to pay property taxes, insurance and maintenance costs on the home. The lender could seize the property if you don’t.