What Is A Reverse Mortgage?

You should always think carefully before making a financial decision, and this is certainly true when it comes to decisions like bankruptcy. However, bankruptcy is not the only decision that has long-term effects. What about something like a reverse mortgage?

Reverse mortgages are loans that specifically target senior citizens and involve using their home equity. You must be at least 62 years old to receive a reverse mortgage.

Reverse mortgages are meant to give seniors the option of borrowing from the equity in their homes. The amount of the loan will be used to pay this senior owner monthly payments which can serve as income. This amount does not have to be repaid as long as the owner remains in that same house. However, the loan will have to be repaid at some point either by the senior citizen or by the survivors.

This might sound like a fantastic bargain, but remember that the loans have to be repaid eventually. If you don’t repay them, then the lender can take over the house and leave your heirs with nothing. If you don’t have any children or grandchildren that will inherit your house, this may not be such a bad idea. You could use the money as income and not worry about what will happen to your house when you pass on.

Did you know that a reverse mortgage may change your eligibility for Social Security benefits? These are the type of things that you need to find out about before making a decision. Never let anyone push you into making a decision and don’t get too excited about the money that you would receive. Remember that the loan has to be repaid at some point whether it is during your lifetime or during the life of your heirs.

If you want to keep your home but have a large amount of debt, bankruptcy may be the better option. We’re not saying this is always the best option, but the point is that you can wipe out debt while protecting your home (depending on the homestead exemption in your state and how much debt you owe). You shouldn’t be so quick to put up your house as collateral in order to pay unsecured debt like credit cards and other financial obligations.