The pros and cons of a reverse mortgage 

The good things about a reverse mortgage 

You can stay longer in your home. You have more ways to meet your changing financial needs as you get older thanks to the different ways you can use equity. For example, using a reverse mortgage to make home improvements so you can age in place may be cheaper than selling your home and moving to a smaller one. 

You can add to your retirement income. If you choose to get payments from your Selling a Home every month, you'll always have money coming in. 

Debt can be paid off. If you have high-interest debt or medical bills that you haven't paid, you can pay them off with a lump-sum distribution. 

You don't have to do anything with other retirement accounts. If you get money from a reverse mortgage, you might not have to pay penalties for taking money out of other retirement accounts too soon. 

You'll have more freedom with your money. You can use the money from a reverse mortgage in any way you want. This gives you the freedom to do what's important to you and your family. You can help a child pay for college or fix up your home to meet your or a loved one's changing needs as you or they age. 

Your income in reverse isn't taxed. The IRS doesn't count reverse mortgage payments as income, so you don't have to pay taxes on them, no matter how you get them: in a lump sum, as a monthly income, as a line of credit, or as a mix of all three. 

You won't leave your heirs a house that is under water. Reverse loans have built-in safeguards that limit how much your heirs will have to pay if there is a balance left over after you die. 

You don't have to meet requirements for your debt-to-income ratio (DTI). If you don't have a mortgage payment, you need less money to qualify. But a lender will need to make sure that you can pay your property taxes, homeowners insurance, and, if necessary, payments to a homeowners association (HOA). 

If you die or move out, your spouse can stay in the house. Even if your spouse wasn't a co-borrower on the loan, they can stay in the home after you die or move to a long-term care facility if you were married when you got the reverse mortgage. But they have to meet some requirements set by the U.S. Department of Housing and Urban Development (HUD). 

The bad things about a reverse mortgage 

The value of your home will go down. One big problem with reverse mortgages is that you lose the value of your home. If you don't pay down the balance of your reverse mortgage, you'll make less money when you sell your home or have less money to borrow if you need a new loan. 

You'll have to spend a lot up advance. Reverse mortgages are more expensive than other types of home loans because you have to pay up to $6,000 in loan origination fees, an upfront mortgage insurance premium worth 2% of your home's value, and other closing costs. 

You might not be eligible for other ways to get money. Before you decide how to get your money, talk to a financial planner or lawyer. Why? If you get money from a reverse mortgage, you might not be able to get Supplemental Security Income (SSI) or Medicaid. 

You'll give less money to your heirs. As the balance of a reverse mortgage goes up, the amount of equity your heirs would get from it goes down. When you die or move, if they can't pay back the loan, they won't be able to keep the house. 

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