What is a reverse mortgage? Classically defined as a loan under which the homeowner receives monthly payments based on his or her accumulated equity rather than in a lump sum. This loan must be repaid upon the death of the owner or upon the sale of the property or at a prearranged date. Although the original mortgage need not be paid off, significant equity must be present.
In simple terms you are leveraging your equity to get money to help you pay your bills. In my opinion, I would discourage this action unless you are astute in investments or have no other option of paying for basic necessities. A personal home usually is the largest equity source for people. So, be responsible when you use this type of loan. You or your spouse must occupy the property or face the call on the loan, so if you are moved to a nursing home, you may be forced to sell the property to settle the debt.
This article is not meant to scare you from a reverse mortgage. It just presents itself as a buyer beware product. This type of loan can be a life saver for some people and a nightmare for others if not properly managed. Make sure you dot all the I's and cross the T's when you use this.
Have a great day!
CD
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