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

Reverse mortgages are a good option for some, but they're not for everyone. Carefully review your finances before taking out a reverse mortgage.

5. The earliest age you can take out a reverse mortgage is 62.

That's nice that that's an option, and there's little doubt that some people who are 62 can use a reverse mortgage. And there is a line of thought that says the earlier the better, since the upfront costs of a reverse mortgage are significant, and so if you're a youngish person in their 60s, you're going to benefit longer from this type of loan.

But since a reverse mortgage is set up to help you get through the last stage of your life, if you're in your early or mid-60s, you may want to ask yourself if you're really at that point. (If this helps, Boland says the average Bank of America customer who takes out a reverse mortgage is 74.) What if you're still kicking at 82 and suddenly you want to sell your home and move to Portugal? Or maybe more realistically, replant your roots 500 miles away to Boise to live with your daughter and grandchildren?

You can sell your home and move away, but chances are, you won't have any equity left to make a profit, which means funding your lifestyle in Portugal is probably out. But if your kids are going to shelter you, you may be okay with selling your house and having nothing left to show for it, especially since these are non-recourse loans (if you sell your house for $200,000 but your monthly payments from the reverse mortgage these last 20 years mean that you've been paid $225,000, it's the bank that will take the loss, not you).

Still, clearly, there are a lot of questions to ask yourself before jumping into these. The expression look before you leap seems tailor-made for the topic of reverse mortgages. But there also seems little doubt that a reverse mortgage can be a financial lifesaver for the right person. Where the skill comes in is deciding if you're the right person.

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