Reverse mortgages are a popular option for retirees who need extra money, but they come with some drawbacks. A reverse mortgage is a loan that allows homeowners who are at least 62 years old to access the equity in their home. The loan does not require monthly payments, and the funds are not taxable. However, there are still costs associated with the loan, such as insurance premiums, origination fees, and interest.
Additionally, the loan balance does not expire until the borrower moves out of the house, dies, or fails to pay taxes or insurance. Heirs who want to keep the house must pay off the balance of the loan. Reverse mortgages can be a useful financial tool when used at the right time and in the right scenario, but it is important to understand all of the associated costs and risks before taking out a loan.