Is a reverse mortgage dangerous? Are they detrimental to a seniors retirement? Or could they possible be a good thing?
Like any other tool, it is not the tool that is dangerous, it is how the tool is used. For example, if you have a hammer, it is not a bad thing. But if you have a hammer and bang it on a window, you are not going to like the results.
Think of a reverse mortgage as a tool. When used properly, it can be the greatest thing in the world. Let's look at some examples.
1. If a senior is short the necessary funds to live a healthy retirement, but has a home paid for free and clear, should they not take advantage of a reverse mortgage and fund their own retirement?
2. If a senior has a mortgage payment that is sucking up all the monthly income, wouldn't it make sense to use a reverse mortgage to pay off the current mortgage, thus freeing up several hundred if not thousands of dollars each month?
3. A senior with an ok retirement, but really can't afford to travel and visit family without really feeling the squeeze, might benefit by freeing up enough cash to make these trips affordable.
4. in this example, let's say the seniors have enough money each month left over to actually save some every month. Trust me, this is rare. And if this is you, consider yourself fortunate. I am not saying that you didn't earn it, but with al the retirement accounts getting ripped off (like Enron and others), your in a better spot than most. Well in this case, I would guess that a reverse mortgage isn't for you. There may not be any benefit.
But that said, I have seen some seniors use them to purchase a second home in a warmer climate or something nearer to their family. If you want to see more about how to use a reverse mortgage to purchase a home, follow the link.
But are reverse mortgages dangerous? You may want to visit the page on reverse mortgage misconceptions if you think they are. A reverse mortgage is simply just like any other loan, but you don't have to make any monthly payments. You can never be kicked out of your home, and any remaining equity is yours or your heirs upon selling.
If you want to read more about specific reverse mortgage dangers, look at our blog.