Reverse mortgages earned a bad reputation years ago, and some of it was deserved. Today they are a solid tool for the right situation, with real costs. Here is the honest list on both sides.
The pros
- Stay in your home. That is the whole point. You keep title and keep living there.
- No required monthly payments on most products. That can free up real cash flow on a fixed income.
- Easier qualifying. It is based mostly on age, home and equity, not income.
- Flexible ways to take the money. A lump sum, later draws or monthly advances, depending on the product.
- Pay off a mortgage or debt. Removing those payments is one of the most common uses.
- Help family now. A living inheritance, while you are here to see it.
- Protection features. Some lenders include a no negative equity feature, subject to conditions.
The cons
- Rates are typically higher than a regular mortgage or HELOC.
- Interest compounds. The balance grows and the equity left in your home shrinks over time.
- Upfront costs. Set up, appraisal and legal fees, plus possible prepayment charges if you sell in the first few years.
- Less left for the estate. Usually, though rising home values can offset some of it.
- Ongoing obligations. Miss property taxes, insurance or upkeep and the loan can go into default.
- Spouse risk. If a spouse is not on the loan, it can come due when the borrower dies or moves out.
- Limited further borrowing. You usually cannot add another mortgage behind it.
Borrow $300,000 at once at 7%, compounded twice a year, and pay nothing back, and you owe about $597,000 after 10 years. On an $800,000 home with prices flat, that leaves about $203,000 of equity. With prices rising 3% a year, about $478,000. Not a quote. Your numbers will differ.
The honest test
If a cheaper tool solves your problem, use that one. Compare a HELOC, property tax deferment, renting a suite, family help, or downsizing. A good broker will tell you when a reverse mortgage is the wrong move. That is my job.
Red flags when you shop
- Big dollar promises before anyone has valued your home
- Pressure to sign quickly or skip independent legal advice
- Vague answers about fees, rates or when the loan comes due
- Claims that your kids keep the home with no repayment
- Tax or benefits promises with no mention of a tax advisor
- Anyone who will not put costs and conditions in writing
Questions people ask
Are reverse mortgages a scam?
No. They are regulated loans from established lenders. The bad reputation mostly comes from older products and aggressive sales. The real risks are cost and equity erosion, which you should see in writing before deciding.
Will I owe more than my home is worth?
Rarely, and some lenders include a no negative equity feature that caps what is owed at the home's fair market value if you met your obligations. Ask for the exact wording.
What is the biggest downside?
Cost over time. Interest compounds, so the longer the loan runs, the less equity is left. Borrowing less, or later, helps.
About the author
Matt Blake is a licensed mortgage broker in British Columbia with BRX Mortgage Inc. He helps homeowners 55 and over, and their families, compare reverse mortgages with HELOCs, selling and downsizing, and he will tell you straight when a reverse mortgage is the wrong move.
Licence MB600487 · BRX Mortgage Inc., brokerage licence X301291 · Last reviewed October 2026
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