Is a Reverse Mortgage Right for You?
If you are older and living on a fixed income, you may find that your monthly income is simply not sufficient to meet your monthly needs. Or you may be doing fine, but then an unexpected expense comes up, and you or a member of your family needs to count on you for a sudden large infusion of cash. A reverse mortgage is one way to generate such income, but it is not a step that should be taken lightly. There are many factors to consider before making such a decision, and you could benefit greatly from the advice and assistance of an attorney who practices regularly in the areas of real estate, bankruptcy, probate and estate planning, all of which may be impacted when dealing with reverse mortgages.
What is a Reverse Mortgage?
A reverse mortgage, also known as a home equity conversion loan, allows you to receive cash in exchange for the equity you have built up in your home. A reverse mortgage is different from a conventional mortgage in that you are not required to make any principal or interest payments while you continue to live in the home.
Like any mortgage, a reverse mortgage can reduce the value of your estate. While this fact should not prevent you from applying for a reverse mortgage if it is necessary and in your best interests, it is something to consider and perhaps discuss with your children, especially if they are the ones who would inherit the home in the future and are also the individuals needing the additional money right now.
The reverse mortgage option is open to individuals 62 years old or older. If you do not qualify for a reverse mortgage, or if a reverse mortgage is not right for you, there may be other options to leverage your home equity and generate income, such as with a home equity line of credit (HELOC), or a conventional first or second mortgage. While all of these options may generate cash, they also create additional monthly financial obligations.
Additional information and resources can be found at the AARP page on reverse mortgages.