Reverse Mortgages, Are They Right For You?

Should you jump on the booming reverse mortgage bandwagon to finance your retirement years?  Learn more about reverse mortgages and if it is really right for you.

Your retirement days are getting closer.  Shouldn't you be live the lifestyle you have always dreamed of?  Imagine all those exciting places to visit, all those fun things to do, all those free hours to just put your feet up and relax the way you have always wanted.  Well, the list never really ends there – it goes on and on!

More and more retirees are now turning on to reverse mortgages.  From a mere 8,000 reverse mortgage borrowers in the late 90's, the number considerably grew by leaps and bounds to about 86,000 in 2006.  But what really is a reverse mortgage?  And do you really need one?

Understanding Reverse Mortgages
The Reverse Mortgage Program allows Americans aged 62 or older to tap into their home equity as a means to augment their retirement incomes.
 When the Reverse Mortgage Law was passed some 20 years ago, it was viewed to address the financial difficulties faced by seniors who are burdened with diminishing retirement funds.

What's good about this program is that the owners (usually retirees and/or seniors) are allowed to stay in their homes while using their houses' equity to pay for their other expenses.  If you are a retiree who wishes to sell your house anyway after you are gone, a reverse mortgage may allow you to enjoy your retirement in style.

A reverse mortgage can also be defined as the mirror image of a regular mortgage but instead of the borrower making the payments out to the lender, it is the lender who makes payments out to the borrower!  Cool, isn't it?  But be forewarned – reverse mortgages are not for everyone.

Do You Need It?
Ask yourself if you really need the money.  If you need a rather large amount of money or are looking for an ongoing source of income throughout your retirement (which can easily last for about 20 years or more), a reverse mortgage may be right for you.  Otherwise, don't even think about it!

Why?  It's because reverse mortgages can be a rather expensive and tricky affair.  Their high upfront expenses coupled with their complex features may not be worth it if you just need a small amount of cash.
If that's the case, you may better go for home-equity line of credit, or consider trading your present house to a smaller one.

If you are convinced that you really need to get a reverse mortgage, you need to know how much you can get for your home.  Well, this depends on many factors including your age, the market value of your home, and the interest rate at the time the reverse mortgage was made.

The amount may also depend on the reverse mortgage program that you choose.  Will you go for the Department of Housing and Urban Development's Home-Equity Conversion Mortgage (HECM) or will you rather get a loan from a private lender?

Say, for example, your home is worth about ,000.  In this case, you can get a better value from the HECM compared with a private lender.  However, if the market value of your house is considerably higher than most houses in your area, you can possibly get a more substantial loan from a private lender.  For a more comprehensive and accurate estimate on how much your home is really worth, you can consult a financial expert or visit several online sources that offer such services.

Your home is one of the most valuable assets that you own.  You can pass it on as a lasting legacy for the future generation or choose to use it to finance you through your retirement years.  Only you can decide what's really best for you.