What is a Reverse Mortgage and Should I Get One?

Financing your retirement is no easy feat. You’ll need enough money to cover your regular expenses, your hobbies, and potentially significantly increased medical costs. If you’re worried about funding your golden years and you own a home (either free and clear or with a small mortgage balance), a reverse mortgage could help alleviate your stress.

A reverse mortgage is as exactly how it sounds. If you’re age 62 or older, a lender will make payments (monthly or lump sum) to you, based on the equity in your home. But make no mistake — this is a loan, using your home equity as collateral.

While this loan could make a positive impact on your life now, you may end up leaving less to your heirs than you’d like since it will ultimately need to be repaid.

Let’s explore some of the nuances of a reverse mortgage so you can gauge if it might be right for you.

Types of Reverse Mortgages

According to the Federal Trade Commission (FTC), there are three main types of reverse mortgages:

• Single Purpose: Loans are made by state/local governments or non-profits, but availability can be limited. Funds can only be used for one, predetermined purpose, such as home repair. This can be a good route for you if your income is low as the cost to…