5 Things You Need to Know Before You Do a Reverse Mortgage

They aren't a trick, but they can be tricky

By Geoff Williams, FrontDoor.com | Published: 7/10/2009

Before doing a reverse mortgage, learn the pros and cons to determine if it's the right option for you.

You're told that the house that you have lavished attention on for years will now take care of you. Your house will pay you back by paying you back -- in freeing up your home equity, you'll get monthly payments for as long as you remain in your home, which could be effectively, the rest of your life. Or instead you can receive an immediate giant chunk of money upfront and then just live in your house for as long as you like. Or you can use the equity as a line of credit, or you can do some form of all of the above.

If you have intelligent, reputable, caring people advising you, they can be as good of a deal as advertised. If you don't, you can get into a mess. Even in the best of situations, they aren't for everyone, and as with any loan -- and make no mistake, it's a loan -- you really need to know what you're getting into.

So if you're thinking of taking out a reverse mortgage, here are some issues to consider. Then after considering them, go huddle with your family, maybe an attorney, and especially a HUD-approved reverse mortgage counselor.

1. Be aware of upfront and extra fees.
2. Does your spouse own your house?
3. A reverse mortgage should be a last resort, not a first resort.
4. Be skeptical of the credit line option.
5. The earliest age you can take out a reverse mortgage is 62.

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