Should I Get A Reverse Mortgage?

A reverse mortgage is a loan against your home equity that you don't have to pay back as long as you live there. Assuming you have enough equity in your home, you could use a reverse mortgage to pay off your existing mortgage.

Reverse mortgages are different from any other loans, and the risks to borrowers are unique. These loans are expensive, and up-front fees may total thousands of dollars.

The advantage of a reverse mortgages is that you don't make payments to a lender. But you can still default on the loan if you fall behind on your property taxes, homeowner's insurance, or homeowner-association fees, or if you fail to keep your home in good repair, if you default, you could lose your home.

Ask yourself the following questions:

1.     Can I afford a reverse mortgage? These loans can be very expensive, and the amount you owe grows larger every month. If you are not facing a financial emergency now, then consider postponing a reverse mortgage. 

2.     Can I afford to start using up my home equity now? The more you use now, the less you will have later when you may need it more for emergencies.

3.     Do I have less costly options? Do you have other financial resources that you could use instead of a reverse mortgage, such as a home equity loan or a home equity line of credit?

Before agreeing to a reverse mortgage, consider other alternatives such as downsizing, refinancing, or arranging a loan privately with a family member, using your home equity as collateral. Talk to a CPA or financial planner to make sure a reverse mortgage is right for you. And shop around - some lenders are reducing or even waiving origination and servicing fees.