Kiss Your Home Goodbye with a Reverse Mortgage

If you are considering a reverse mortgage loan to fund your retirement, make sure that you understand exactly what a reverse mortgage is and what it will do.  Sure, if you are age 62 or more, you can borrow the equity in your home in a big lump sum or receive it monthly.  It is true, that you do not have to repay the loan while you live in the home, no matter how long that may be.  In addition, yes, you can use the money any way you would like, including as a line of perpetual credit.  There is a down side however, that must be considered.

Leave With Nothing

How does a reverse mortgage work, really?  A reverse mortgage is where you sign away your home to a company that will loan you the equity in it.  When you pass away, or become too ill to stay in the home and move in to assisted living, you can then kiss your home goodbye, and so can your heirs.  Unless you save all of the money you are loaned, the reverse mortgage leads to the loss of your home for you and your children and you will have nothing to leave them if you were counting on it.

Astronomical Fees and Interest

The fees for a reverse mortgage loan are nearly astronomical and the interest is sky high.  The interest, by the way, is compounded in a way that drains your equity faster than any other loan.  You also have to make the insurance premiums every month and you cannot miss a month without danger of reneging the loan.  The Reverse mortgage is not as pleasant as many would have you believe.  This is especially true if you are receiving the loan in monthly installments.  The equity goes faster this way.  The reverse mortgage leads to an extra income, but the cost is a dear one.

Reverse Mortgage Survival

How does a reverse mortgage work to make your retirement easier?  It gives you money that you would otherwise not have.  However, if you must get a reverse mortgage to survive, consider taking a lump sum so that you do not lose so much of the equity to interest.