When Is A Reverse Mortgage A Bad Idea?

Reverse mortgages have become more popular in recent years as a way of allowing seniors to access the equity in their homes and turn it into cash. But they are not always the best solution. Here are some cases where another option may be better for you.

If you are still young (close to 62, the minimum age for a reverse mortgage) this type of loan becomes more expensive. This is because of the effect of compound interest. If you're only going to use the money to go on holiday, it is an expensive way to fund it.

You also need to take into account the possibility of your needs changing in the future. Although you are fit and healthy now, you may have healthcare needs in the future. If your equity is already used up at a young age, you may not have access to it when it is desperately needed later on.

You should also consider the alternative of selling your existing property and moving to a smaller house or renting. This will leave you with a cash lump sum. Some people have a large house that was fine when they had a family but is now difficult to manage, as they are getting older. Moving to a smaller house or apartment may make life easier as well as bringing in some money.

If you always had the dream of being able to pass on the family home to your children, this may not be possible if you have taken out a reverse mortgage. It may be necessary to sell the house to repay the reverse mortgage.

A reverse mortgage has proved to be a financial lifeline to many older people. But it isn't right for everyone. There are issues that need to be discussed within the family in order that the best solution can be arrived at.

By: Paul Elms

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