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bad things about reverse mortgages

Reverse Mortgage Tips

Vera Gibbons spoke with Julie Chen about when is a good time for a reverse mortgage and what to look out for.

8 things to know about a reverse mortgage

Sullivan says consumers should be aware of the costs associated with a reverse mortgage.  He says upfront fees including origination fees and closing costs can be significant.

“There’s the mortgage insurance premium, typically two percent as well as annual payments,” Sullivan says. “There’s a high origination fee and there are monthly service fees. So it’s a very expensive way to borrow money compared to other means.”    

What happens to my existing mortgage?

Seniors with an existing mortgage – or any of liens against their home – must pay off the loans with the reverse mortgage. In other words, they cannot have a traditional mortgage and a reverse mortgage at the same time.

“If you already have a mortgage, you have to pay that off before you can take any of the other cash from the HECM,” Sullivan says. “The first part of the reverse mortgage proceeds has to pay off the existing mortgage.

what are the bad things about reverse mortgage ? what makes it a bad choice?

It's really going to depend on your situation. What are your goals, and when do you wish to accomplish them.