Making Sense of Reverse Mortgages

You've probably noticed commercials on television that talk about reverse mortgages, but what is a reverse mortgage exactly? Most people are familiar with a traditional mortgage where you borrow money in order to purchase a house, but a reverse mortgage is just the opposite. This time, the bank pays you money each month, or extends a line of credit as they essentially buy the home from you.

With a reverse mortgage, the roles are reversed. While this cash may come in handy during retirement, it does come with estate planning considerations. The bank is looking to take your home upon your passing, which could cause problems if you had intentions of leaving your home to your heirs. This may or may not be a problem, but it is important to keep in mind that this is how a reverse mortgage differs from simply obtaining a home equity loan or line of credit. Reverse mortgages are also typically only available to people age 62 or older, so this is more or less a retirement product.

Before you decide to get a reverse mortgage, make sure you understand how they work. Just like a traditional mortgage, they are complex products that can be lined with fees and complicated terms. While a reverse mortgage may be right for you, you'll want to make sure you're being treated fairly as well.