reverse mortgage, HECM, FHA, reverse mortgage home purchase, HECM origination fees, HECM settlement costs, HECM mortgage insurance premiums, HECM servicing costs

Use a Reverse Mortgage to Repair the House?
December 3, 2007, Reviewed January 27, 2010 , July 29, 2012, January 24, 2014, March 28, 2017

"I am 72 yrs old, my mortgage is paid off, I intend to live with my children in a year or two, at which point I will sell my house. In the meantime, I have some repairs to make and some credit card balances I would like to pay off. I am thinking of taking out a reverse mortgage, then paying it off when I sell. Good idea or not?"

Bad Idea. A reverse mortgage is not suitable for raising funds for a short period, because the upfront cost is so high. See Costs of a Reverse Mortgage.

The appropriate instrument to use for your purpose is a home equity line of credit (HELOC), on which the upfront cost is low -- sometimes zero if you shop carefully. See How to Shop For a HELOC.

Note however that when you use a HELOC, you must pay interest monthly, which means that you must draw enough to cover the interest payments in addition to the repairs. Within a 2-year period, the HELOC remains the better choice but this may not be the case over longer periods.

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