Typically, a reverse mortgage must be a first mortgage. That means that if you still owe money on your home you must pay off the existing mortgage to qualify for a reverse mortgage. However, you can use the lump sum proceeds from a reverse mortgage to pay off an existing mortgage.
You don't have to repay a reverse mortgage for as long as you live in the house but the amount that ultimately has to be repaid does grow over time.
Even though the amount of debt grows over time, the reverse mortgage repayment amount cannot exceed the value of your home at the time it is ultimately sold.
If you take out a reverse mortgage, you continue to own your home. This means that you continue to be responsible for expenses such as property taxes, insurance, maintenance and repairs.
Reverse mortgage proceeds may affect eligibility for assistance under certain state and federal programs.
The costs of a reverse mortgage, such as an origination fee, closing costs and mortgage insurance premium, can be significant. If you anticipate moving within a few years, you should consider other alternatives, such as a home equity loan, or personal loans from family members, etc.
A reverse mortgage is essentially a cash or line of credit advance against the equity in your home. That means there will be less equity to pass to your heirs. That doesn’t necessarily mean that your heirs will have a smaller inheritance. That will depend on what you do with the money you receive from the reverse mortgage. If it is used to protect other assets from major expenses your estate might actually be enhanced.
Posted by C. Thomas Thames