What's the Story About Reverse Home Mortgages - Good or Bad?

Many senior citizens are approached by firms and mortgage companies with offers of reverse mortgages and all claiming amazing benefits of these type loans. It sounds like a great idea - access your homes equity, make no monthly payments and not having to sell your house. Some guarantee income for the rest of your life. With traditional mortgages you take a loan from a bank using your real estate as collateral, and pay interest on this loan making monthly payments. The equity is the amount of your real estate appraisal value minus the balance of your mortgage loan. A reverse mortgage is the opposite of this where basically the bank holds your house and pays back to you the difference of appraisal value minus, if any, mortgage & equity loan balances over a time period. You don't make any monthly payments and interest is taken away from the equity value and decreases your equity (net worth) in the house. This loan does not get paid off until you sell the house or no longer live there. This type of loan is geared to seniors struggling with little or no income or pension, and you can spend the money as you choose.
Beware these are being advertised as funds for a new car, vacation or similar items you may not now be able to afford. These reverse mortgages are very expensive, draining your house of valuable equity that took you many years to accumulate. Basically you are using you home as a large ATM machine paying fees on equity you already own. If you have any outstanding loans on the property the reverse mortgage company will combine all debt into a new loan so they are the prime lender. The most funds available to you will be 65% of your homes value. If the home value doesn't appreciate due to poor market value it is possible to you will have no equity left. Remember it is still you and your lenders house and you are responsible for any and all repairs large and small to maintain market value. So if you need a new roof or heating system you will need to have the funds to make those repairs. Reverse mortgages do work for people in special situations, but the end cost is very high and should be thoroughly investigated before making any mortgage or loan commitments.