As people get older, they might come upon tough financial times. Especially if they don’t have much stored away in savings. If they have taken the necessary measurements to ensure a comfortable retirement financially, then they are in the minority. The vast majority of people who are at retirement age underestimated how much they would need to retire and are forced to find other sources of income.

So many people who could have otherwise retired are forced to go back to work just to keep up with the bills. They start a second career or take an entry level job just to pay the bills. Gone are the days when social security is enough to live on. A reverse mortgage is a great option for anyone who finds themselves in this predicament. What is so special about a reverse mortgage? Let’s analyze a reverse mortgage a little closer.

In essence, a reverse mortgage is the opposite of a traditional home loan. When you initially purchase a home, you put down a small payment and then finance the rest. You then pay down the principal until eventually you own the house free and clear. The nice thing about a reverse mortgage is that the lender gives you monthly payments, and you’re not expected to pay it back until the end of the agreed upon term - which isn’t until you sell the home, or die.

How you can benefit from a reverse mortgage is pretty obvious. You get to live in the house that you’ve been living in for quite some time and the bank makes a monthly payment to you until the house value is reached. By doing this, you are able to receive a passive source of income without having to do anything except fill out some paperwork.

This type of loan is only available for those over the age of 62 and only for those who have a good deal of equity in the house. The primary condition is that they have the home paid off, or they must be really close to having it paid off. Unlike traditional mortgages, you don’t have to have any income to qualify. As you won’t be repaying it with payments, the bank is not concerned on whether you can pay the mortgage back. The house acts as security against the amount they loan you. The bank (or lender) doesn’t have to worry about the value of the home because it is FHA insured.

The largest drawback to a reverse mortgage is that you can’t pass on a home that you own free & clear to your heirs, but as they say - “you can’t put a trailer hitch on your coffin anyway”. This may or may not be important to those involved, but it should be a consideration.

Given the right circumstances, a reverse mortgage can be a great way to go. Be sure to discuss this with those who are closest to you. It never hurts to have a second opinion when it comes to matters like these. Check with your mortgage broker and play with the numbers. Just make sure this works for you in botht the long run as well as the short run before committing to anything.

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