Terrified of Reverse Mortgage but husband is pushing it

[walleyes]

To preface - I have the (prejudiced) opinion that all reverse mortgages are either scams or extremely unfair and hostile in their terms. OTOH my husband is sucked in and is pushing really hard to do it.

We have sold our house - and are buying a new construction, upper middle class house - cash - and he wants the extra cash (like $100K) to do improvements/upgrades and maybe live a little more luxurious (vs frugal). It makes a little sense - but I can't stop envisioning such a lien eating away equity - with terms that could force the instant sale of the house for some ridiculous lowball amount to edify the payoff. (read too many stories of this happening). It's not like we would ever default on taxes or maintenance etc. We are both 72 and have a very good Social Security income (and 401Ks etc.) More liquid assets than the proposed loan/lien amount. BUT many stories I've seen about people losing their houses due to medical issues - or the passing of one spouse - basically anything to force the sale of the house.

I've heard it's required by law to have counseling before getting one of these loans but I'm already being pushed towards applying/signing without any kind of discussion. The whole thing is very scary and we certainly do not NEED to do it. He is a very smart guy (retired CFO), but I don't get this at all.

He's saying the fees would only be $7,000 (to start) - not sure what interest rate. Not sure what to do.

 

[ucbruin]

72 yo....
You look much younger....
Last year my neighbors of 20 years (he ~70 & she late 60s) sold their condo and purchased a $900K new construction less than a mile away "as the crow flies"....

I was curious when my neighbors told me they were moving but didn't want to ask....
But as you are a stranger....
What is the appeal for folks our age bracket of buying a house cash and depleting your cash on hand....

Sorry, I didn't respond to your reverse mortgage question and instead asking a very personal question to boot....

 

[Surf Cat]

I've heard it's required by law to have counseling before getting one of these loans but I'm already being pushed towards applying/signing without any kind of discussion.

If you have to sign for the A-OK as you are on title, don't. Put your foot down until you are satisfied and comfortable with the situation. If counseling is required, go through the counseling. It'd be better for your harmony under the same roof.

I've been married to the same woman for over 30 years. You let some things bounce off your back and others....you take a stand.

 

[glenn walker]

At your age your depleting cash which i thinks crazy but if your moving no matter what the Reverse may be your best move. $7k is nothing compared to running out of cash plus not having a mortgage payment and you can love in it of he dies.

 

[Overimprovement]

I would recommend getting some loan advice on the different types of mortgage loans, their plusses and minuses, costs, etc. There are traditional 1st mortgages, HELOCs (with and without a traditional 1st in place), reverse like you are considering, etc.

It is important for you both to be totally comfortable with your choice. Financial matters can quickly erode years of marital bliss.

 

[alebrewer]

I think that HECM's can be a very good solution for lots of folks, but they can also be the absolute wrong move for folks - it all depends on your individual financial situation. Just keep in mind that origination fees are typically higher for HECM's, there's a 2% up front MIP and then a 0.5% annual MIP (assuming it's still the same). The biggest downside (IMO) is that the mortgage continues to compound over time (meaning equity continues to erode).

 

[KHS445]

So many questions and things to consider.

How is your health? One of you in better health than the other? Women generally live longer than men, so things may come to the point that your husband is gone and you need to down size. Chances are if/when that happens there will be little or no equity left in your house. Could also go the other way if you go first. Individually, do you have enough income and other assets that you could afford senior living, an apartment, or a smaller house without the equity in the house you are purchasing?

Depending on how long you live there it is most likely there will be little or no equity left to pass on to your heirs.

At your ages the fees (which if rolled into the reverse mortgage) will accumulate interest as will any outstanding balance, so my guess is you will loose close to $1,000 in equity per month to begin with, then remember that this months unpaid interest is added to your balance owing so next month you will accumulate interest on that money, so on and so forth month after month.

With more than 50 years banking and real estate experience, I can honestly say a reverse mortgage is not for everyone. Primarily they can be a benefit to older homeowners who have limited income and need help making major repairs to their home, covering basic living expenses, etc. They are not ideal for younger seniors like yourselves who just want to live beyond their means. How much of the money will be going into the home vs how much will be fun money? Remember all that is going in the house will be tied up by the reverse mortgage. So even it is a 50/50 split what are you going to do when you have gotten used to the fun money and it runs out in a couple of years?

My recommendation would be to close on your new home and get settled in. Then sit down as a couple and decide what improvements you would like to make, prioritize that list and then agree to a time frame for completing each of the items. Then if need be borrow say $25,000 via a home equity loan, complete the task and pay the loan back or down and then move on to the next item on your list. Also, will your planned improvements increase the value of the home or just fulfill a desire or dream? Thinking man cave, finished basement, in ground pool, etc.

In a longterm marriage there are not many hills worth dying on, but when it comes to a financially secure retirement, one needs to think longterm and not instant gratification. Definitely insist on counseling and if you are not 100% on board with moving forward, DO NOT AGREE TO ALLOW A REVERSE MORTGAGE TO BE PLACED ON YOUR PROPERTY!

 

[TerryRohrer]

In your shoes, I would be asking myself if renting would be superior to buying (even though I loathe the thought of renting). Bigger bit of cash in the bank and no maintenance to attend to when it gets harder to do (an almost certainty at some point).

 

[Elliott]

My opinion is a Reverse Mortgage is a bad deal. It is a mortgage with high insurance fees. I've done the 'after' appraisal when the original owner has died. The estate usually has to wait a year to get an opportunity to buy the property back. Owners of property with a RM tend to not take care of them. If you need the money, a straight re-fi, a second mortgage, home equity loan, or borrowing against your equity stock (pledged asset loan) is a better way to go financially. Also, inflation will reduce the buying power of the 'monthly payment' each year. I needed financing on a home purchase and got a first mortgage at 6% for 30-years and needed some interim financing, borrowed against equity stock at .....6.5%.

Reverse Mortgage Rates:

"AI Overview
As of early 2026,
HECM reverse mortgage rates generally range from 6.19% to 7.93%, with fixed rates typically higher (7.56%–7.93%) and adjustable rates lower (5.25%–6.94%). These rates are highly dependent on the lender, loan type, and the borrower's age."

Perplexity AI also said this about RMs:

"Major financial costs
• High upfront fees: Expect origination fees, mortgage insurance premiums, closing costs, and servicing fees that are often much higher than for a traditional mortgage; these are often rolled into the loan and immediately reduce equity.
• Compounding interest: Because you make no monthly payments, interest is added to the balance every month, so the debt grows and can accelerate quickly over a long retirement.
• Often variable rates: Many products use variable interest rates, so rising rates can cause the balance to grow faster than expected, further eroding equity and complicating planning.
• Limited net benefit if you already have a sizeable mortgage: A large portion of proceeds may simply pay off your existing loan, leaving you with relatively little usable cash but all of the reverse-mortgage costs.
Impact on home equity and heirs
• Shrinking equity: As interest and fees accrue, your remaining equity generally declines, leaving less value available if you later sell, want to downsize, or need to refinance into another product.
• Reduced inheritance: Because the loan is repaid from sale of the house (or other funds), there is often little or no equity left for heirs, which can frustrate estate-planning goals.
• Only partial access to equity: Program limits and actuarial assumptions mean you typically can’t borrow anywhere near 100% of your equity, yet over time you may consume most or all of it in fees and interest.

Ongoing obligations and foreclosure risk
• You must still pay taxes, insurance, and maintenance: You remain responsible for property taxes, homeowners insurance, HOA dues, and basic upkeep; failure to pay or maintain the property can trigger default and foreclosure.
• Primary-residence requirement: You must live in the home as your primary residence; moving out for more than a limited period (for example, extended stay in assisted living) can cause the loan to become due and may force a sale.
• Foreclosure risk: If you fall behind on taxes or insurance, violate occupancy rules, or otherwise breach the loan terms, the lender can call the loan and foreclose.

Effects on benefits and flexibility
• Possible impact on means‑tested benefits: While loan advances themselves are not taxable income, keeping unspent proceeds in the bank can increase countable assets and jeopardize eligibility for needs‑based programs like Medicaid or SSI.
• Reduced flexibility: Having a reverse mortgage can make it harder to move, downsize, or restructure your housing later, because selling the home immediately triggers repayment and high upfront costs may not be recouped if you don’t stay long.
• Interest deductibility limited: You generally cannot deduct interest annually as with some traditional mortgages; the deduction usually comes, if at all, only when the loan is repaid, which may limit tax planning opportunities.

Complexity and suitability issues
• Product complexity: Reverse mortgages have complicated terms, insurance features, and eligibility rules, which many borrowers and family members do not fully understand even after mandatory counseling.
• Mismatch with goals: For homeowners who want to preserve home equity, expect to move, or have other assets they could tap first, a reverse mortgage may be an inefficient or risky way to generate cash compared with selling, downsizing, or using other credit options."

 

[Sadie]

IMO, there are very few situations where a reverse mortgage makes sense. From what you have posted, this is not the case. As pointed out in previous responses, the equity will get eaten up by high fees and unpaid interest. Of course the loan officer is pushing it, the commission is higher for this type of loan than a credit line.

Why not either get a small mortgage now or get a line of credit to tap?