reverse mortgage basics

Reverse Mortgage Disadvantages

Like all financial products, reverse mortgages have some drawbacks. Which of these factors should you consider before applying for one?

1. A reverse mortgage may reduce your Medicare and Social Security benefits.
2. A reverse mortgage may affect your ability to receive benefits from Medicaid or other needs-based government programs.
3. A reverse mortgage may increase the amount of equity you have in your home.

“B” is correct. A reverse mortgage can jeopardize your benefits from Medicaid or other needs-based programs if you receive a large cash advance and do not spend it the same month. You may pay higher financing fees on a reverse mortgage than on a conventional mortgage or home equity line of credit. The larger your loan balance grows, the less equity you will own in your home.