One of the rising trends in retirement planning right now is the reverse mortgage. A reverse mortgage is essentially another type of home equity loan -- but instead of you making payments to the bank, the bank makes payments (or a lump sum) to you. Trees Full of Money points this out about the advantages of a reverse home mortgage:
The loan is repaid when you die (from your estate), sell your home, or no longer live there as your principal residence.
As an added protection the Federal Housing Administration (FHA) guarantees you will never owe more than the selling price of the "mortgaged" house.
While a reverse mortgage can be quite helpful for many retirees who need the cash flow, and can't afford the home equity loan payments, it is important to realize that it is not for everyong. And the fees can erode the money you get from your home. Some of the fees that come with a reverse mortgage include:
- Origination fees.
- Appraisal fee.
- Credit report fee.
- Flood certification fee.
- Pest inspection.
- Monthly account service fee.
- Mortgage insurance.
Before you make such a decision, carefully consult with a third party and decide whether a reverse mortgage would be best for you.
image credit: sxc.hu
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