Despite several big-name banks pulling the product from their respective home loan offerings, reverse mortgages remain a popular mortgage choice among homeowners aged 62 or over. A reverse mortgage is exactly what it sounds like -- a mortgage in reverse. Rather than borrow a fixed amount of money then pay that loan balance down to zero as with a "forward" mortgage, a reverse mortgage starts at a given loan balance and works its way up as scheduled payments are added to the existing loan balance. This 4-minute piece from NBC's The Today Show highlights a few pros and cons of reverse mortgages, and the reasons why you may want to consider one, including :
There are some basic qualification standards for the reverse mortgage program including a requirement that all borrowers on title must be 62 years of age or older; and that the subject property be a primary residence. Loan fees can also be higher than with a conventional-type mortgage. If you meet the qualification standards, though, with a reverse mortgage, you have flexibility in how your home equity is distributed to you. You can receive a lump-sum payment, elect for monthly installments over time, create a line of credit, or a combination of all three. Like all mortgages, reverse mortgages are complex instruments. That's one reason why all reverse mortgage borrowers are required to attend counseling -- the government wants you to be certain that you understand the nuances of the reverse mortgage program. Your lender will want you to understand the program, too.