When used properly, it can be an effective financial planning solution. If you are approaching or over age 62, you should learn more about reverse mortgages.
At one time, reverse mortgages had a bad reputation. In addition to being heavily marketed by celebrity spokesmen, abuses and misuse were rampant. As a result, the federal and state authorities stepped in and tightly regulated the products.
A reverse mortgage is conceptually the same as a traditional mortgage, except that there is no set monthly repayment required. Instead of using the money only to purchase or renovate a house, the proceeds of the reverse mortgage can be used by the borrower for virtually anything they wish. To qualify, you must be at least 62 years of age, have no other federal debt, have enough income to cover tax, insurance and maintenance expenses associated with the house and receive certified counseling on home equity options. The property must be your primary residence and meet all FHA property, flood, health and safety standards and receive an FHA appraisal.
We have a more detailed discussion of reverse mortgages in this article on our website.