The CNN Money Help Desk addressed a viewer question today which asks: What are the pros and cons of acquiring a reverse mortgage? Help Desk expert and Certified Financial Planner Doug Flynn answered the question.
The pros, he says, are access to home equity while being able to stay in the home. Flynn says the cons are that reverse mortgages are very expensive, and borrowers can end up disinheriting their children from the home.
Flynn provides the example of a $100,000 reverse mortgage on a $200,000 home. Instantly, the borrower may owe $120,000 due to the fees, and “it can compound in a phantom way,” he says. “One day, that $120,000 is going to cross the value of the home…Once that happens, you can stay in it, but there’s nothing left for the kids. It has a need, but you have to be very careful.”
View the CNN Money Help Desk segment.
Written by Elizabeth Ecker
