5 Reasons Why Getting a Reverse Mortgage is a BAD Idea

Companies spend a lot of money making reverse mortgages sound appealing, but the truth is that getting a reverse mortgage isn’t always the best idea.

For years reverse mortgages have been championed as a great way for you to fund your retirement (if you are of retirement age) by borrowing against one of your biggest assets: your home.

But unfortunately, reverse mortgages come with a lot of drawbacks that can really impact your budget and put you in a worse financial position.

If you have considered taking out a new reverse mortgage, here are 5 reasons why taking out a reverse mortgage may be a bad idea.

Exceptionally Expensive

Contrary to popular belief, financing isn’t free. Much like you would pay closing costs and fees to obtain a traditional mortgage, reverse mortgages come with a variety of costs. These costs can make reverse mortgages expensive in both the short and long term.

To start, most lenders charge origination fees when you decide to take out a new reverse mortgage. The actual costs will depend on the value of your home but is usually a percentage of what your home is worth.

For a typical FHA insured home equity conversion mortgage (HECM), a typical origination fee can add up to 2% of the first $200,000 your home is worth or $2,500, whichever is less ¹ . Anything over the first $200,00 will be an additional 1% ¹ .

While these fees can vary for proprietary reverse mortgage products, they still add up. If you do go with an HECM loan, there are also upfront mortgage insurance premiums to consider.

Other factors related to cost that you should consider is that most reverse mortgages have a variable rate ¹ . This means that the amount of interest added to your balance each month can vary over the entire loan term.

Problems After Probate

Another downside to using a reverse mortgage is how it will impact your estate when you pass away. Reverse mortgage can be especially problematic if you happen to die unexpectedly.

If you choose to have someone live with you, maybe a close friend or other relative, and you die unexpectedly, those individuals may no longer be permitted to occupy the home if they are not on the loan.

But your death could have even further implications for any heirs you leave behind. Since your reverse mortgage encumbers the home, the heirs may have to go through the process of selling it in order to pay off the outstanding debt.

The other option is that if your heirs want to retain the property, they must come up with the means to pay off the debt themselves or refinance it into a traditional mortgage. This can be quite a hurdle, especially if your heirs don’t have enough funds of their own or cannot qualify for a new mortgage.

Repairs, Insurance, and Cost of Living

Just because you open a new reverse mortgage doesn’t alleviate you from having to maintain your home. In fact, part of what you agree to will involve keeping up with maintenance and paying your real estate taxes and insurance.

Most people forget to factor these costs into their monthly budget when they take out a new loan. Over time, these costs can add up and really eat into what you get from your reverse mortgage. If you become delinquent on these expenses, you could default on your loan and risk going into foreclosure ² .

Another item to consider is cost of living. A lot of times reverse mortgages don’t adequately keep up with the rising cost of living. The Bureau of Labor and Statistics noted that from 2018 to 2019 the cost of living on general household staples, including food and housing, increased by 2.3% ³ .

Relocating is Restricted

Make sure you love where you are living before you commit to a reverse mortgage. That’s because most reverse mortgages require that you occupy your home as a primary residence for most of the year.

When you move, you are also required to pay off the balance of your reverse mortgage. If you know you want to relocate in the near future, it may cost you more to get a reverse mortgage and pay all the costs just to pay it off.

If you are also a homeowner with health concerns, a reverse mortgage may not be a great solution. In general, you need to be healthy enough to live in your home and maintain it.

If your health declines to a point where you have to move into assisted living or another long-term care facility permanently, the debt would need to paid off.

Impact Other Retirement Benefits

Reverse mortgages can also have tax consequences and impact your eligibility to receive other retirement benefits.

While the federal government may not consider the money you receive from a reverse mortgage as taxable income, you also cannot deduct any interest from your reverse mortgage on your annual tax return until the loan is paid in full ¹ .

You also may not qualify for other government-sponsored programs such as social security income (SSI) or Medicaid ² .

While a reverse mortgage may affect certain homeowners differently, it’s important to discuss these implications with a financial advisor or tax professional.

Sources

1 Egan, J. (2020, June 23). What Is the Downside of a Reverse Mortgage? Retrieved April 29, 2021, from https://www.experian.com/blogs/ask-experian/what-is-the-downside-to-a-reverse-mortgage/

2 Bond, C. (2021, March 31). 5 Reverse Mortgage Pros And Cons. Retrieved April 29, 2021, from https://www.forbes.com/advisor/mortgages/reverse-mortgage-pros-cons/

3 Bureau of Labor and Statistics. (2020, January 16). Consumer Price Index: 2019 in review. Retrieved April 29, 2021, from https://www.bls.gov/opub/ted/2020/consumer-price-index-2019-in-review.htm

The post 5 Reasons Why Getting a Reverse Mortgage is a BAD Idea appeared first on Fresh Home Loan.

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Garrick Werdmuller

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garrick@freshhomeloan.com

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From Garage to ADU: How a 203(k) Loan Helped One Family Maximize Their Space

By Garrick Werdmuller • June 18, 2025

🛠️ From Garage to ADU: How a 203(k) Loan Helped One Family Maximize Their Space 🛠️ Buy It and Fix It With One Loan: The FHA 203(k) Limited A few years ago, I helped a couple purchase their home with just 5% down. It was a great fit for them at the time — solid neighborhood, the space they needed, and a bonus: a detached garage with potential. Fast forward to today — their teenage son was getting older and needed his own space. Naturally, they started exploring how to turn that detached garage into an Accessory Dwelling Unit (ADU) so he could move in and have a bit more independence. They gave me a call, hoping to tap into their home’s equity with a line of credit. But after running the numbers, it became clear that a traditional HELOC wouldn’t provide enough funds to cover the full conversion. That’s when I brought up a lesser-known option: the FHA 203(k) Limited loan . The FHA 203(k) Limited program snapshot outlines a renovation loan product allowing borrowers to finance both the purchase and rehabilitation of a property with a single mortgage , specifically for non-structural repairs or improvements. Here's a summarized overview for reference or communication: 🏡 What Is It? The FHA 203(k) Limited is designed for: Homebuyers purchasing a fixer-upper Homeowners refinancing and remodeling Primary residences only You can finance both the home and non-structural renovations—like kitchens, bathrooms, floors, HVAC systems, roofs, appliances, and more—with a single mortgage . 💡 Why Use a 203(k) Limited? ✅ Finance up to $75,000 in repairs and upgrades ✅ Only 3.5% down payment ✅ One loan, one closing ✅ No 203(k) Consultant required ✅ Ideal for non-structural repairs and cosmetic improvements ✅ Perfect for first-time buyers and FHA borrowers 🛑 What You Can’t Do With It This is for light remodeling only. You can’t use this loan for: Structural changes or additions Foundation work Landscaping (except for erosion prevention) Pools, hot tubs, or other luxury features (Bummer ! I know! 😒) 🧾 Borrower Submission Checklist Here’s what we’ll need to get started on your FHA 203(k) Limited loan: ✅ Basic Docs Loan Application (apply online or schedule an appointment) Government-issued ID Most recent 30 days of paystubs Last 2 years of W-2s or tax returns (for self-employed borrowers) Most recent 2 months of bank statements ✅ Property & Repair Info Signed Purchase Contract (if purchasing) Contractor’s Written Proposal with: Itemized list of repairs Cost breakdown (labor + materials) Statement that work is non-structural W-9 form from contractor Contractor license & insurance (if required by local jurisdiction) ✅ Appraisal & Renovation Docs Appraisal supporting As-Is and After-Improved Value Permit list (if applicable) Final Work Plan (signed off before close) 💬 Final Thoughts The FHA 203(k) Limited can turn a fixer into your dream home—or give your current space the refresh it deserves. With just one loan , you get flexibility , affordability , and peace of mind . Have a property in mind? Let's talk! 👉 Schedule a Free Consultation https://freshhomeloan.com/schedule-a-meeting/ 🏡 #FHA203k #203KLoan #RenovationLoan #FixerUpper #HomeRemodel #MortgageSolutions #FirstTimeHomeBuyer #HomeLoanHelp #RealEstateTips #MortgageBrokerLife #CaliforniaHomes #BayAreaRealEstate #CentralValleyHomes #DreamHomeGoals

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Guía definitiva de préstamos ITIN – Tu paso hacia la compra de casa

By Smith Chung • June 18, 2025

¿Qué es un préstamo ITIN? Un préstamo ITIN es una hipoteca diseñada para personas que declaran impuestos usando un Número de Identificación de Contribuyente Individual (ITIN) en lugar de un número de Seguro Social (SSN). El ITIN lo otorga el IRS a quienes no son elegibles para un SSN pero aún así deben declarar impuestos en EE. UU. 💬 En resumen: ¿No tienes SSN? ¡No hay problema! Si has sido financieramente responsable y cuentas con documentación básica, ¡podrías calificar! 💪 👨‍👩‍👧‍👦 ¿Quién se beneficia de un préstamo ITIN? Los préstamos ITIN están diseñados para quienes persiguen el sueño americano — incluso sin documentación tradicional. Podrías beneficiarte si: 🌎 Eres inmigrante viviendo en EE. UU. sin green card ni SSN 🧾 Declaras impuestos usando un ITIN 💼 Tienes ingresos estables (W-2, por cuenta propia o incluso en efectivo con comprobantes) 💳 Pagas renta y servicios a tiempo y puedes demostrarlo 💥 Hemos ayudado a familias que pensaban que comprar casa era imposible — ¡y cerraron en solo 30–45 días! 🛠️ ¿Cómo funcionan los préstamos ITIN? Los préstamos ITIN generalmente son financiados por prestamistas no tradicionales (non-QM) o bancos especializados que operan fuera de los lineamientos de Fannie Mae/Freddie Mac. Aquí te explicamos cómo funcionan: 💰 Tipos de préstamo: Tasa fija o ajustable Compra, refinanciamiento o retiro de efectivo Propiedad principal, segunda vivienda y algunas propiedades de inversión 💵 Pago inicial: Generalmente del 10 % al 20 % A menudo se permiten fondos de regalo 📊 Crédito: En algunos casos no se requiere puntaje FICO Se puede usar historial de renta, servicios públicos o incluso crédito internacional 📉 Tasas y plazos: Ligeramente más altas que las convencionales Disponibles con tasa fija a 30 años o ARM de 5/7/10 años 📄 Documentación que necesitarás Para obtener una precalificación, debes demostrar estabilidad, ingresos y solvencia. La mayoría de los prestamistas solicitarán: 🆔 ITIN válido y vigente 📑 2 años de declaraciones de impuestos 💼 Comprobante de ingresos (W-2s, 1099s, o P&L si trabajas por cuenta propia) 🏦 2–3 meses de estados de cuenta bancarios 🌐 Identificación válida (pasaporte, matrícula consular, etc.) 🏘️ Historial de renta (comprobante bancario o carta del arrendador) 💡 Consejo extra: ¡Algunos prestamistas incluso aceptan ingresos o activos del extranjero! 🚫 Conceptos erróneos comunes sobre los préstamos ITIN ❌ Mito 1 : Los préstamos ITIN son ilegales. ✅ Falso. Son 100 % legales y cumplen con las regulaciones federales. ❌ Mito 2 : No calificas si eres trabajador independiente o te pagan en efectivo. ✅ No es cierto. Con declaraciones de impuestos o registros bancarios, definitivamente puedes calificar. ❌ Mito 3 : Te van a estafar o cobrar de más. ✅ ¡No con nosotros! Buscamos la mejor opción para tu préstamo y te explicamos todo con claridad. 🌱 ¿Por qué los préstamos ITIN son importantes para nuestras comunidades? 🏘️ Ser dueño de una casa crea riqueza generacional, estabiliza vecindarios y eleva a las familias. Para muchos inmigrantes, los préstamos ITIN son un puente hacia un futuro mejor — y nos enorgullece ser parte de ese proceso. ❤️ 🧑‍💼 Cómo pueden ayudar los agentes de bienes raíces Agentes inmobiliarios — ¡no dejen pasar esta oportunidad! Los compradores con ITIN son leales, motivados y, en muchos casos, están bien establecidos en sus comunidades. Aquí algunas formas de atenderlos mejor: 🤝 Haz equipo con prestamistas que conozcan las reglas de ITIN • 📆 Establece tiempos y expectativas realistas • 💗 Lidera con empatía y orientación 📣 ¿Quieres destacar? Dirige tu marketing a clientes con ITIN — ¡nosotros te respaldamos! 💼 El enfoque de Fresh Home Loan hacia los préstamos ITIN En Fresh Home Loan Inc., trabajamos con prestamistas confiables para ofrecer soluciones hipotecarias ITIN rápidas, justas y transparentes. Ya sea tu primera casa o una inversión, estamos contigo en cada paso. ✅ 🚀 ¿Listo para comenzar? ¿Conoces a alguien que pueda beneficiarse de un préstamo ITIN? Hagamos realidad el sueño de ser dueño de una casa — de la forma correcta, con apoyo y claridad desde el primer día. 🏠✨ “Llama hoy mismo para empezar tu precalificación — en Fresh Home Loan hablamos tu idioma y creemos en tu futuro.”