If you are a homeowner over the age of 60, you might wonder if a reverse mortgage is a sensible option for you. Some television ads make it sound as if a reverse mortgage can be the solution to all your problems, but you wonder if there is a downside. If you are thinking about a reverse mortgage, it is important to understand what a reverse mortgage is and learn the advantages and disadvantages.

What is a Reverse Mortgage?

You cannot decide if you want a reverse mortgage without understanding what a reverse mortgage is. When you get a regular mortgage, you buy a house and make payments to the bank every month, gradually building equity until you own the home outright and are done with the mortgage. With that in mind, a reverse mortgage is another home loan, but instead of you are making payments and growing equity every month, the bank pays you every month and your equity in your home dwindles every month.

Why Would Someone Want a Reverse Mortgage?

Sometimes it makes good financial sense to give up your hard-earned equity for cash in your hand and a guaranteed income stream. You might want to consider a reverse mortgage if:

• You have current financial problems that will be solved long-term with a reverse mortgage.
• You do not plan to move in the next several years. There can be expensive up-front fees with reverse mortgages, so if you are not planning to stay in your home for quite a few years, the fees might outweigh the benefits of the mortgage.
• You do not plan to pass your home to your children or anyone else through inheritance. Your equity will, in effect, decrease every month as you draw checks from the loan known as a reverse mortgage.
• You have enough money to continue maintaining the home and pay the real estate taxes and homeowner’s insurance. If you do not do so, the lender can call the loan and sell your home to pay off the loan. If your house is in disrepair when sold, it will have a lower market price, which will further deplete the value of one of your most significant assets.  
• Your spouse is 62 or older and can be a borrower on the reverse mortgage. If he or she is on the loan, they will not have to move out of the house if you move to a nursing home or die. Your spouse will also continue to get the monthly income checks after you move out of the house if they are on the note.
• You want to qualify for Medicaid to pay for nursing home expenses. Sometimes it is possible to keep the home, maintain an income stream to your spouse, and still be eligible for Medicaid nursing home assistance through the savvy use of a reverse mortgage.

Reverse mortgages are technical and complicated. Make sure you talk with someone who understands the ins and outs of reverse mortgages before getting one. The loan experts at Community Mortgage will be happy to answer your questions and help you reach an informed decision that is right for you. Contact us today at (619) 692-3630 to learn more.