Six Top Tips for Reverse Mortgages

As America's population ages, reverse mortgages are growing in popularity as a means for older homeowners to tap into their home equity for needed income. In order to best manage a reverse mortgage, it helps to understand them thoroughly, and follow a few basic tips and guidelines.

The increasingly popular, but rather exotic, "reverse mortgage" lets older homeowners take advantage of the value of their homes without actually selling their property. Many seniors use a reverse mortgage to supplement retirement and social security income, pay for healthcare, make home improvements, or fund travel and leisure activities.

Here are six helpful tips for those interested in reverse mortgages:

1. It may pay to wait. You can usually qualify for a higher income stream of monthly payments if you're older. Depending upon your situation, it may be worthwhile to postpone the mortgage, just as it's sometimes more lucrative to postpone retirement in order to boost social security and pension plan payouts.

2. Ask lots of questions. Understand the terms of the mortgage, ask questions until all the small print is comprehensible, and be careful not to violate important terms of the agreement that could have negative repercussions. Don't nullify the mortgage unless it makes powerful financial sense.

3. Primary forever. If you sell your home, or no longer use it as a primary residence, you'll need to repay the cash that you received from the reverse mortgage lender, plus interest and other fees. You get to retain the remaining equity in your home, assuming there's any left.

4. One as good as two. Typically, you don't need to repay the loan if one of the borrowers named on the mortgage continues to live in the house, and keeps the taxes and insurance paid up and current. If a spouse dies or moves into a healthcare facility, don't panic. You're probably still eligible for the reverse mortgage's original terms and conditions.

5. Do it yourself. Don't pay a third party vendor to help direct you to a lender or mortgage broker. These estate planning services sell information that you can get by yourself for free, so it's a waste of your money.

6. Payout is key. There are several different ways to get money for your home equity through a reverse mortgage, and choosing the most appropriate method is one of the most important decisions you'll make. Figure out whether you want equal monthly payments, a line of credit you can draw on when needed, or a combination of monthly checks plus a standing line of credit. You can also elect to get all of the money as a lump sum payment.

Once you've got a game plan that suits your needs, shop according to the plan that suits you best to find the most attractive deal from the most reliable lender. Consult a real estate attorney with experience in reverse mortgages before signing any documents, and then look forward with confidence to a more carefree retirement.