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Question:


What is a reverse mortgage? Is it a good thing?
-AlmostRetired


Answer:


A reverse mortgage is a means for homeowners at least 62 years old to borrow against the equity in their property and use the loan proceeds for living expenses or any other purpose. Depending on how the deal is structured, they can get a lump sum or monthly payments or arrange a line of credit to provide cash when the need arises.
 
Unlike a conventional home loan, the homeowner makes no payments on a reverse mortgage; instead the amount owed increases each month to reflect the accruing interest and any new borrowing. The balance is typically paid off when the home is sold or within a year after the owner dies.
 
There are strings attached to the loans. The maximum amount that can be borrowed is $625,500, even if you live in a palace, and anyone taking out a reverse mortgage must take a course, costing $100 or so, that explains what they’re getting themselves into. There are other fees, too, as with any mortgage.
-Conrad de Aenlle



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