Reverse mortgages are relatively new products in the world of retirement income, and there's much confusion over how they work. In essence, here's what the national trade group, the National Reverse Mortgage Lenders Association, says about them: "Reverse mortgages are available to seniors 62 years old and older with significant home equity. They are designed to enable elderly homeowners to borrow against the equity in their homes without having to make monthly payments as is required with a traditional 'forward' mortgage or home equity loan. Under a reverse mortgage, funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells or passes away. Borrowers may draw down funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments for as long as they continue to live in the home."
May be a bad deal
Even if the reverse mortgage is not a scam, it may come with so many charges and hidden fees to make it a bad deal. And of course, the person trying to sell it to you probably won't mention that.
If you think you might be interested in a reverse mortgage, your best course would be to speak with a HUD counselor, or a financial planner who does not sell mortgage-related products.
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