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Q&A: Reverse Mortgage

Question

Reverse Mortgage

Is a reverse mortgage an effective method for freeing up equity in a home for investment?

Answer

NO! We strongly dislike reverse mortgages and think that they should only be used as a last resort measure for a person who needs funds to live on and who has no other source of income or liquidity.

The fees associated with reverse mortgages can be very high and can quickly erode the equity in a person's home. Moreover, in addition to impacting the person borrowing, the material reduction in equity negatively impacts a borrower's heirs.

In summary, you would almost never want to use proceeds generated in a reverse mortgage for investment purposes and would generally want to avoid this structure altogether unless you are left with no other options to cover basic living expenses.


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Reverse Mortgage

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