Should You Get A Reverse Mortgage?

Reverse MortgageRetirement used to be something which everyone looked forward to. After forty plus years of being in the workforce, retirement is the chance to enjoy the twilight years of your life, kick back and relax. However, this isn’t the case anymore for a significant number of individuals approaching retirement age.

Retirement involves saying goodbye to the daily grind, but that is only a good thing if you have saved up a nest egg enough to allow you to live comfortably throughout the remainder of your years. For those who do not have enough saved up in the bank though, work, even when one should be retiring, may be the only consolation no matter how dreary it might sound.

Is there any option left for you?

If you’re already in your 60s and you haven’t tucked away the proverbial cool million in the bank yet, then you may need to look into your other options. No matter how limited your recourses may be, you still have a choice to make. One option would be reverse mortgage. Exactly how it sounds like, reverse mortgage enables you to take out a loan against your home equity. However, you do not have to worry about paying back the mortgage provided that you are still living in your home and have not sold the same.

Reverse mortgage as a retirement option is only available when you reach the age of 62. The great thing about reverse mortgage is that you can have available money to spend throughout your retirement but you do not have to worry about the famous consequence of taking out a loan – paying it back.

How does a reverse mortgage work?

A lender makes payments to you according to the percentage of your home’s value which you own. Once you relinquish the property, i.e. through death, the lender will then sell of your home in order to recoup the amount that was doled out to you.

The terms of your reverse mortgage will depend on the lender, but there are some general features to a reverse mortgage which includes the following:

1. A larger loan amount is usually given out to older homeowners compared to younger ones. In the same manner, a house which is more expensive will also fetch a larger loan.

2. The reverse mortgage has to be the primary debt against the house. In order for the reverse mortgage to be approved, other debts against the house have to be settled or the other lenders must allow the subordination of their loans to the mortgage holder.

3. Request for repayment may be made by the lender if you fail to maintain your property or to pay property taxes, or if you declare bankruptcy, commit fraud or abandon your home. Condemnation of the property, adding another owner in the title, subletting of the property, change of the property’s zoning classification and taking out other loans


There are some experts who suggest that for those who weren’t fortunate enough to have saved enough in bank, then reverse mortgage may be a great option. However, this leaves a problem with what you leave to loved ones that are left behind in the event of your death. Once your property is claimed by your lender, then you may not have enough left in your estate to cover the costs of burial as well as your other obligations.

Kent Farell, the writer, is an experienced registered financial planner. His blog is full of useful tips to overcome bad debts. He also shares his insights on investing, financial management and lease financing.