You may be all too familiar with commercials featuring folksy celebrities explaining how everyone tells him that reverse mortgages sound “too good to be true,” but there isn’t a catch this time. You can have the best of both worlds: You can stay in your home and get cash for the equity you have built up. What’s more, you never have to pay back the loan.
A reverse mortgage is a home loan available only to those 62 years of age and older. Unlike typical loans, no monthly repayment of these loans is required. Senior citizens can tap into the equity they have built up in their homes. Payment of the loan is deferred until they die, transfer ownership of their home, fail to pay taxes or insurance, fail to keep the home in good repair or move out.
According to a report prepared by the Consumer Financial Protection Bureau for Congress in June of 2012, there are a number of issues with reverse mortgages. Few of these problems are referenced in the rosy picture painted by those who sell these products. However, for some seniors, it may be an appropriate option that will permit them to remain in their homes and access funds needed to pay their living expenses in retirement.
If you are considering a reverse mortgage, there are other options that will permit you to gain access to the equity in your home. These options may (or may not) be preferable to a reverse mortgage.
Read the rest of the article on US News.