Money·2 min read

Is a Reverse Mortgage a Good Idea?

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Design: theSkimm | Photo: iStock
May 13, 2022

Hello, sandwich generation. If your parents are looking for some extra cash, ask if they’ve checked in their house. Because homeowners over 62 can tap their home equity to cover living expenses. Without selling their home.Meet the reverse mortgage. Which is an option worth considering for seniors who need a little more in the bank.

What is a reverse mortgage?

It’s a mortgage loan that allows senior homeowners to borrow money using their house as collateral. Instead of making monthly mortgage payments, the loan is repaid when the homeowner no longer lives there. 

The fine print: Borrowers are still responsible for insurance and property taxes. And the balance grows monthly due to interest and fees.

What are the pros of a reverse mortgage?

Extra income

A reverse mortgage can help supplement the income loss that many sandwich generation parents experience following retirement. PS: Mortgage payments are usually people’s biggest expense.


The funds from a reverse mortgage are considered proceeds from a loan. So it isn’t taxable.

Limited debt

In some cases, the balance on your reverse mortgage can exceed the value of your home. That won’t impact your debt. Because the amount you’re required to repay has to be lower than your property’s value.

What about the cons of a reverse mortgage?

Upfront costs

A reverse mortgage means paying more closing costs. Plus lender fees and FHA insurance fees. Psst…you can throw the fees into the loan balance. But that’ll mean less equity and more debt.

No more mortgage tax breaks

Mortgage payments come with mortgage interest deductions on your taxes.But not when you have a reverse mortgage. At least not until the loan is paid off.

Who qualifies for a reverse mortgage?

Besides being 62 or older, there are a few more requirements to keep in mind. Including:

It has to be a primary residence.

Like refinancing, you can’t have a reverse mortgage on an investment property or vacation rental.

You must have a low mortgage balance.

Before jumping into a reverse mortgage, you’ll need to have a low balance on your mortgage. If your home is paid off, even better.

Be on top of your federal debt.

In order to qualify for a reverse mortgage, all federal debt has to be current. Yep, that includes student loans. Hi, forgiveness.


Reverse mortgages come with their share of cons.But they can be a huge help for cash-strapped seniors (and their concerned family members). Because they’re a great way to turn home equity into cash…without having to sell a home.

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