Reverse mortgages have become very popular over the last few years. The main reason is that the allow retirees to take the equity that they have in their house and turn it into cash without having to actually sell their house. This makes it a good choice for many people who need additional money to cover the costs of their retirement. That being said a reverse mortgage is not for everybody so you will have to make sure that you are ready for one before you make the commitment.
The first question that you have to ask when you are trying to decide if you are ready for a reverse mortgage is just what is a reverse mortgage? A reverse mortgage is a loan that is secured by the equity that you have in your home. It is only available to homeowners over the age of 62. The great advantage that reverse mortgages offer is that they do not have to be paid back until you sell your house so they are a great option for supplementing your retirement fund.
The biggest consideration when considering a reverse mortgage is where you are planning to live during retirement. When you have a reverse mortgage the money does not have to be repaid as long as you live in the house but as soon as you sell the house it has to be paid back in full. The longer that you have the loan for the more you will have to pay back as interest will continue to add up. Therefore if you are planning to retire in your current house and stay there a reverse mortgage could be something that is worth considering. On the other hand if you are planning to move to a smaller house when you retire it might not make sense to take a reverse mortgage.
If you are planning to move when you retire a reverse mortgage still might be an option that is worth considering but you will have to work it in a different way. You can use a reverse mortgage as a home buyer not just as a home owner. This assumes of course that you will have equity in your new house that can be used for the loan. If you are planning to move it might make sense to sell your existing house and then use a reverse mortgage on the new one as this may provide some tax savings, you will however want to talk to a financial advisor about this before you make any final decisions.
The other big thing that you are going to have to think about when you are considering a reverse mortgage is how it will affect your estate after you have died. This is a particularly true if you want to leave your house to your heirs. In most cases what will happen is that you estate will sell the house and use the proceeds to pay of the reverse mortgage. Obviously this is going to be a problem if they want to hold onto the house as they will have to have another source of with which to pay off the reverse mortgage. The other thing to consider is that having a reverse mortgage will reduce the amount of your estate that is being passed on. Whether that is a factor or not in deciding whether to take one is obviously going to be up to you.