 TITLE: What Is the Downside of a Reverse Mortgage? CONTENT: Drawbacks of a Reverse Mortgage\n-------------------------------\nAlthough a reverse mortgage enables an owner to tap into perhaps hundreds of thousands of dollars in home equity, there are several downsides to a reverse mortgage. Those include:\n*   **Various costs**: Similar to a traditional mortgage, a lender typically charges several fees when you take out a reverse mortgage. Those can include a mortgage insurance premium, an origination fee, a servicing fee and third-party fees. For an HCEM, the initial mortgage insurance premium is 2% of the loan amount; on top of that, you'll pay an annual mortgage premium of 0.5%. You'll also pay an origination fee of $2,500 or 2% of the first $200,000 of your home value (whichever is greater), plus 1% of the amount exceeding $200,000; origination fees cannot exceed $6,000.\n*   **Variable interest rates**: Most reverse mortgages have variable interest rates, meaning the interest rate that determines how much is added to your loan balance each month fluctuates throughout the life of the loan.\n*   **No tax deduction**: Interest paid on a reverse mortgage can't be deducted on your annual tax return until the loan is paid off.\n*   **Less equity**: A reverse mortgage can siphon equity from your home, resulting in a lower asset value for you and your heirs.\n*   **Potential home repairs**: If your home isn't in good shape, you might need to make repairs before you can qualify for a reverse mortgage.\n*   **Possible early repayment**: Aside from when a homeowner dies or moves out, the reverse mortgage loan might need to be repaid sooner than expected if the owner fails to pay property taxes or homeowners insurance, or if the owner isn't keeping up with home maintenance.\n*   **Medicaid eligibility.** A reverse mortgage doesn't affect your Medicare or Social Security benefits, but it might affect your eligibility for Medicaid benefits. END