Top 8 Factors to Consider Before Taking Out a Reverse Mortgage

The reverse mortgage can be a great retirement tool for many homeowners age 62 and older. It allows you to borrow cash against the equity you may have accumulated in your home. In addition to supplementing your income, it also allows you to stay in your home for as long as you want. However, there are many things to consider before getting a reverse mortgage.

the amount you get

The amount you can get as a reverse mortgage depends on the type of equity you have built up in your home. If possible, you can do a home appraisal to find out how much you are entitled to borrow. See if the amount is enough for your needs, and then make your decision. The good thing, though, is that you will still have title to your home for as long as you stay in it. However, you will have to pay your property taxes, homeowner’s insurance, and other fees to maintain your home on a regular basis.

Payment options

When it comes to receiving funds from a reverse mortgage, you can choose from a number of different options. You can get it as a lump sum, a monthly payment, or a line of credit. You can also try a combination of these. Consider your personal situation before selecting the correct option. If you have a large one-time expense to cover, you may want to opt for a lump sum. However, if you need the money for your regular living expenses, you will need to choose the monthly payment option. In case you need the money only for emergencies or additional expenses, you can think about opting for a line of credit.


HUD keeps changing the rules for the reverse mortgage from time to time. Existing borrowers may not be affected. But as a senior homeowner thinking about getting a reverse mortgage, you may need to stay on top of all these rules and regulations. Under the latest, HECM borrowers will now be required to pay an initial mortgage insurance premium of 2% of their maximum loan amount instead of the 0.5% they previously paid. This is regardless of the amount you withdraw in advance. However, the annual PIM of 1.25% on the outstanding balance of the mortgage has now been reduced to 0.5% for all borrowers. Borrowing limits have also been lowered compared to what they were previously.


There are many up-front costs associated with reverse mortgages, such as the loan origination fee, appraisal fee, mortgage insurance premium, and closing costs. They can go up to 3 or 4% of the loan amount and are generally financed with the loan. In addition to these, the lender might also charge some loan servicing fees. Many reverse mortgage lenders can contact you through reverse mortgage leads. Check with all of them about the fees involved before signing an agreement with any of them.

Payment plan

Unlike the traditional mortgage, reverse mortgages do not require monthly payments. They become reimbursable only after you die or move out of your primary residence. This is not an option you should consider if you are planning to move out of your home five years from now. If you do, you won’t be able to recoup the closing costs you paid against the reverse mortgage you borrowed.

family opinion

Talking with your family members is very important before taking out a reverse mortgage. Your heirs may want to keep your home after you pass away. In most cases, borrowers use all of the principal when they take out reverse mortgages. And once the borrower dies, the house will have to be sold to pay off the loan. If family members want to keep the house, they will have to find alternative means of financing to pay off the mortgage. Find out what your family members would want to do with their home before they get their mortgage.


How you use a reverse mortgage will determine whether you would benefit from getting one. There are no restrictions on how you use your mortgage amount. You can use it for your ongoing living expenses, going on a family trip, or covering your kitchen renovation costs. However, you will still need a plan before you get the cash. Your age also matters when it comes to using the funds from this type of mortgage. For example, if you’re still in your early 60s, you may want to avoid unnecessary spending so you don’t run out of funds at a later stage.

alternative options

It will work for you if you have few financial resources and if your family members have no interest in keeping or inheriting your home. However, if you try to see the big picture, you can find many other options. See if you have other income or assets to sell. You can sell your house to your children, sell your home, refinance your existing mortgage, or even decide to downsize and start living in a retirement community.

The reverse mortgage is available to all homeowners age 62 and over. However, it may not suit everyone’s requirements. You will need to find out if this is the right option for you before you decide to borrow. Make sure you are aware of the fees and laws, and have a defined plan for usage and payment. Also look into alternative options that are better suited to your needs than a reverse mortgage.

This mortgage is a lifetime decision that can help you lead your retirement life in peace and comfort. However, you may still want to make sure it’s the right move before you say ‘Yes’ to one of the mortgage lenders who come to you via live mortgage leads.