Homeowners aged 62 or older, considering a reverse mortgage should know there are many advantages and some drawbacks. Several ads tout the benefits of reverse mortgages such as allowing homeowners to get cash for the value of their home. Plus the homeowner is permitted to live in the home for the rest of their life without mortgage payments.
However, the homeowner is still responsible for paying the property taxes on the house as well as the insurance. Some ads say heirs can inherit the home, but in order to keep it they must pay off the reverse mortgage loan along with numerous fees and charges which can add up to a lot of money.
The Missouri Attorney General warns some unscrupulous salespeople might try to pressure you into taking out a reverse mortgage with very high fees. Others will tempt you to use money from the loan to buy annuities or investments that may not be beneficial.
BBB recommends elderly homeowners read the ads carefully and do not take out a reverse mortgage unless they fully understand all the costs, terms and conditions.
Those who need cash should consider getting a less costly home equity line of credit and check into programs that help defer or lower taxes and utility bills.