Why a Reverse Mortgage is a Bad Idea

As seniors continue to live longer and have more of a need for other sources of income during retirement, many are turning to reverse mortgages to generate additional cash. While a reverse mortgage will provide additional income without resulting in monthly mortgage payments, there are situations where taking one out is not necessarily a good idea.

Financial Situation

It is generally not a good idea take out a reverse mortgage if the homeowners are on solid financial footing. While the temptation to receive the money may be strong, in the long run the homeowners would be better served by using other financial vehicles for income due to the interest costs associated with a reverse mortgage


The homeowner should be wary of taking out a reverse mortgage for investment purposes. In essence, they could end up losing what they gained from taking out the mortgage. It is important to find out what the person selling the investment vehicle stands to gain, as well as whether they are truly looking out for the homeowner's best interests.

Lack of Spousal Ownership

In some cases, the homeowners may have elected to list only one spouse as the titled owner of the property for legal reasons. If that spouse dies first, the other would then be required to pay back the loan since a reverse mortgage comes due when the last titled property owner moves out or passes away. This could leave the surviving spouse saddled with a large financial burden.


If after just a couple of years after taking out a reverse mortgage the homeowner decides to move, or is forced to move for health reasons, a reverse mortgage can prove to be a costly venture. Since the borrowers are required to pay back the loan when selling the home, they could be caught in a situation where they may be unprepared for many possible financial ramifications.

Considering Alternatives

While reverse mortgages can provide quick cash, in the long run they can be difficult to understand and can result in high costs. Before taking out a reverse mortgage, it is wise to explore other methods of improving a financial situation such as moving to a smaller home or taking out a home equity loan.