You see these commercials once in a while: happy older couple who are able to stay in their home because of the magic of a reverse mortgage. But what is a reverse mortgage?
Basically, it’s a mortgage that you don’t pay until you die or sell your home….but that you can’t refinance either. These mortgages can be extremely restrictive, and so it is particularly important that you read through the fine print to ensure that you are comfortable with the terms. You could end up in a mortgage with fairly high interest compared to the average market rates that you can’t pay out as long as you’re staying in your home. They can be beneficial to a person who has very low cash flow because of a fixed income, but significant equity in a home that has recently increased drastically in value. However, it is critical that you read all of the details. If you are going ahead, you need to go ahead with full knowledge.