What are the biggest disadvantages of a reverse mortgage?
Upfront costs are higher than most loans, including the FHA mortgage insurance premium, origination, and closing costs. The balance grows rather than shrinks, which reduces equity available later and what heirs inherit. Taxes, insurance, and upkeep remain your responsibility, and falling behind can trigger default. It also complicates a near-term move. These are real trade-offs, not small print.
Upfront costs are higher than most loans, including the FHA mortgage insurance premium, origination, and closing costs. The balance grows rather than shrinks, which reduces equity available later and what heirs inherit. Taxes, insurance, and upkeep remain your responsibility, and falling behind can trigger default. It also complicates a near-term move. These are real trade-offs, not small print.
Detailed answer
Anyone selling a reverse mortgage without naming these openly should not be trusted with the decision. Cost is first. The initial mortgage insurance premium, origination fee, appraisal, title, and settlement charges together typically run well into five figures on a Utah home, which is money that never comes back if the loan is short-lived. Compounding is second. Interest and ongoing mortgage insurance accrue onto the balance every month, so the debt grows while the borrower makes no payments. Over a long holding period this can consume a large share of the equity, especially if home values move sideways. Reduced inheritance follows from the same arithmetic. Fourth, the ongoing obligations do not go away: property taxes, homeowners insurance, HOA dues, and maintenance remain the borrower's responsibility, and failing at them is the most common route to default. Fifth, mobility. A borrower who moves within a few years pays substantial upfront costs for very little benefit. A reverse mortgage rewards staying put and punishes leaving early.
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