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.
1. 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. The more you use now, the less you will have later when you may need it more for emergencies.
3. 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.