Why Dave Ramsey Hates Reverse Mortgages

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Dave Ramsey is a well-known personal finance expert who has helped millions of people get out of debt and build wealth. He is the host of a popular radio show and has written several best-selling books on personal finance. One of the topics he often discusses is reverse mortgages.

A reverse mortgage is a loan that allows homeowners who are 62 or older to convert part of their home equity into cash. The loan is repaid when the borrower dies, sells the home, or moves out. The loan can be taken as a lump sum, a line of credit, or a monthly payment.

 

While reverse mortgages can provide some benefits for homeowners, Dave Ramsey is generally critical of them for several reasons. Here are some of the reasons he gives:

1. High fees and interest rates

Reverse mortgages can have high fees and interest rates, which can eat away at the equity in the home over time. Dave Ramsey argues that the fees and interest rates can be so high that they can wipe out the equity in the home entirely.

2. Complicated terms and conditions

Reverse mortgages can be complicated, with many terms and conditions that borrowers may not fully understand. Dave Ramsey argues that this can make it difficult for borrowers to make informed decisions about the loan.

3. Limits on future options

When a homeowner takes out a reverse mortgage, it can limit their options for the future. For example, if they want to sell the home or leave it to their heirs, the loan will have to be repaid first. Dave Ramsey argues that this can make it difficult for heirs to inherit the home or for the homeowner to sell it if they need to.

4. Risk of foreclosure

Reverse mortgages come with the risk of foreclosure if the borrower does not meet the loan terms and conditions. Dave Ramsey argues that this can be a significant risk for homeowners who may not fully understand the loan or the consequences of defaulting on it.

5. Better alternatives

Dave Ramsey argues that there are better alternatives to reverse mortgages for homeowners who need cash. For example, they could downsize to a smaller home, sell unused items, or take on a part-time job.

In conclusion, while reverse mortgages can provide some benefits for homeowners, Dave Ramsey is generally critical of them due to their high fees and interest rates, complicated terms and conditions, limits on future options, risk of foreclosure, and better alternatives. If you are considering a reverse mortgage, it is important to do your research and fully understand the loan before making a decision.

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