What’s a reverse mortgage?  It allows you to borrow equity out of your home when you are mortgage free and own your home outright.  Generally, this is something elderly people do in order to supplement their income and then when they pass away or decide to sell the house, the lender gets their money first. They take their money plus a fee.  Is this a good ide?

If you’re young, a reverse mortgage is not a good idea and you might not even qualify. If you want to take equity out of your house  and you’re elderly, this could help you increase your standard of living and help you do things you want to do in your retirement years.  If you do this, you can still leave part of your equity to your children and not have to worry about paying the loan back while you live in your house.

Some mortgages are done this way for people that are younger who are about to have their home foreclosed. This is a different scenario where you sell your house for dirt cheap and rent it from the new owner which simply saves you from moving but doesn’t save your house. Reverse mortgages for the aged are generally only worth a fraction of the equity.

Any loan that takes a big chunk of your equity or has a very high interest rate needs to be carefully weighed before you make a decision.  The idea might sound like a good one but you also need ot look at the cost of borrowing and whtehr or not that’s a fair rate for having the money now.