Is a Reverse Mortgage a Good Idea?

Updated on May 1, 2020
G L Strout profile image

George Strout is an author, historian and photographer who writes on a wide variety of subjects.

Read on to learn why a reverse mortgage may be more expensive and riskier than other alternatives.
Read on to learn why a reverse mortgage may be more expensive and riskier than other alternatives. | Source

Is a Reverse Mortgage a good idea?

It seems like every day I see an ad featuring a celebrity telling me how much better my life would be if only I signed up for a reverse mortgage. Think how nice it would be to have that extra money to spend on bills, a nice vacation, or other things I can only dream about.

As always, if it sounds too good to be true, run away!

First, a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is debt. And very expensive debt at that. It is available only to homeowners over age 62. According to the Consumer Financial Protection Bureau, the reverse mortgage is more expensive than other home equity loans, depending on several variables such as who the lender is and how much and how long the loan is. Make no mistake, it is a new debt you are taking on, and you or your heirs will have to pay it back along with interest, fees and any penalties that accrue.

Before you can get an approved reverse mortgage, the Consumer Finance Protection Agency requires you to go for housing counseling to verify that you understand and can afford the new debt you are considering. The counselor can charge for this service on a sliding scale depending on your ability to pay. Other up front fees can include origination fees, which can be as high as $6,000, closing costs and initial mortgage insurance premiums.

Ongoing costs can include interest on the mortgage, mortgage insurance premiums and other servicing fees. These fees are added to your original loan. Unless you make payments on the loan, it will continue to grow at an astounding rate, compounding month after month.

How much can you get for your reverse mortgage?

That depends on how much equity you have in your home and your age. You may be able to get up to 80% of the value of your home if you do not have an existing mortgage. Generally, it will be considerably less than that. Several factors influence how much you can get on your house including age, interest rate and value of the property at the time of the loan.

How will you get the money?

You can have a line of credit, monthly payout, or a single lump sum payment. The method of payout of the loan will also affect the interest rate.

Let's talk numbers

Several online reverse mortgage calculators can give you a more personalized estimate of your options. Here are some hypothetical examples:

If you assume a home value of $300,000, your age is 70 and your spouse is 68, the estimated proceeds at closing would be about $91,000.

Costs associated with this example would be:

  • Closing $1,400
  • Origination fees of $2,500
  • Upfront mortgage Insurance $6,000

Another example that you may find interesting is how much the balance of the reverse mortgage will grow over time. Assume a reverse mortgage on a $300,000 home at 3% interest. You receive the lump sum of $90,000 at closing and no monthly annuity. After 15 years, you will owe roughly $141,000.

While these are just general examples, they give you some idea of what to expect. At this point, you may have many more questions. That is a good thing. The reverse mortgage can be confusing. Do not hesitate to press for clear answers to your questions. If you feel unsure of anything, try a different lender or seriously reconsider the idea. Check out other alternatives such as a conventional Line of Credit or refinancing a conventional mortgage. Another alternative may be admitting that the time has come to move to a more affordable living arrangement. For example, what would your situation be if you sold your home and bought an annuity with the proceeds. Could you live better in a rental where someone else is dealing with the problems and expenses of house maintenance?

There is a lot to consider before signing on the dotted line. Ask a lot of questions. Compare lending institutions and terms. Look for other options to resolve whatever financial problem you are trying to deal with before choosing the best solution for you.

Above all else, do not allow yourself to be pressured into getting a reverse mortgage for repairs or improvements to your home. In my opinion, there are usually less expensive ways to cover necessary expenses and, remember, when you no longer live in the home, for example when you move to a care facility, the loan comes due and must be paid in full, often forcing the sale of the house.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)