Real Estate Tips - What is a Reverse Mortgage and is it Right for You?

With the costs of living today, many senior citizens are struggling to live on their income from social security. Many of these senior citizens own homes that are paid off or close to being paid off. Many people are referred to as "house rich", and "cash poor". They have a lot of equity in their homes, but not enough income to pay a monthly payment. Other seniors may take out a reverse mortgage to allow them to afford to travel, to make home improvements or help out family members. There are many different reasons people take out reverse mortgages. As a counselor, I am not allowed to tell people they should or shouldn't take out a reverse mortgage. I do tell them is that it all depends on their own unique personal situation when deciding if a reverse mortgage is the way to go.

A reverse mortgage is an option for people aged 62 or older that owe little to nothing on their conventional mortgages. It is a loan that allows the person to take out an equity loan without making any payments as long as they live in their home. The loan only comes due if the person leaves their home for any reason, (selling, passing away, eminent domain, etc.) taking out new debts against the home or adding a new owner to the title. Also, there are some clauses that state filing personal bankruptcy may also cause the loan to become due. The homeowner can receive their home's equity paid out to them in monthly payments, a lump sum or a line of credit. The homeowner does not have to claim the proceeds taken from the reverse mortgage as income, because in actuality; it is debt.