The Consumer Financial Protection Bureau (CFPB) recently released an article discussing what you should consider before you take out a reverse mortgage. After conducting a study, the CFPB reported that many homeowners "didn't realize reverse mortgage loans need to be repaid." The article presented three key facts to consider when homeowners see advertisements regarding a reverse mortgage including:
- A reverse mortgage is a home loan, not a government benefit.
- You can lose your home with a reverse mortgage.
- Without a good plan, you could outlive your loan money.
Reverse mortgages can be appropriate for some situations and a disaster in others. One elder client was able to use the money from a reverse mortgage to stay in his home rather than move to an assisted living facility or a nursing home. Perhaps fortuitously, the client passed away almost at the same time the money from the reverse mortgage ran out. On the other hand, some people spend their reverse mortgage proceeds unwisely and then lose their home with no equity remaining. Others do not realize the mess they may be leaving behind for their children when they pass away with a reverse mortgage lien on their home.