1. A reverse mortgage is for people who are over the age of 62 in the United States. It lets people over this age take a lump sum payment or monthly payments from the equity of their house. They are not obligated to pay the loan back until the home owner dies, the home is sold, or the owner leaves to go into a nursing home or some other form of assisted living.
2. The reverse mortgage sounds good. Lets say you have paid your house off, your 62 and have $150k in equity in your home. You want to take the money and go on a trip or buy something new. You are on a fixed income but say “we will be dead before we need anymore money.” Problem is that people are living longer.
3. With people living longer you may need more money than what you have already taken. The goal of the reverse mortgage is to give you enough money to get by to pay grocery bills, prescriptions, etc. Not by more crap.
4. So after you burn through that $150k you are in a worse situation than what you were in when you first took out the loan. You don’t make any money because your retired and the lender cannot give you any more money out of the house.
5. So instead of living in a house with no loan on it and maybe leaving behind a house to your kids with no mortgage the house has to be sold or given back to the bank. All of those years of doing the responsible thing and saving have gone right out the door.
6. So what are your options now? The only good thing is that you don’t have to make monthly payments on the loan unless you sell or die. Well, your not dead and you have nowhere else to live. There’s really no point leaving the house because your technically living there for free anyways.
7. More than likely you will need to find other people to live with you or go back to work to get a job. Maybe rent out the house.
8. The problem is that you do not save up enough over the years to have everything paid off and be able to enjoy retirement. Social Security is going down the drain and will barely be able to cover a car payment, car insurance, and gas through out your retirement years.
9. Instead, don’t take out the loan if you really don’t need too. Keep your house paid off and find other ways to raise money such as a part time job or find jobs around the world where you can work and stay there.
10. Remember, the “American Dream” is to own a home. If there is a loan on your home you do not own the home, the bank does. Miss 4 payments and all of those years of building equity go right out the door. keep your house paid off and don’t take out a reverse mortgage.