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My husband and I are both retired, and we own our home but we have a small income. I’ve heard people talking about reverse mortgages. Are they a good idea?

A reverse mortgage can be a good idea, but it depends on your own circumstances. There are a number of different products on the market, some called “reverse annuity mortgages”, and some simply “reverse mortgages” and even “reverse personal lines of credit”. It’s very important to know what your needs are, as well as what you can expect with any one of these options.

The general idea behind a reverse mortgage is to help homeowners like you, who are perhaps retired or semi-retired and need cash, to use the equity in your home to generate income. A financial institution or lender will set up a reverse mortgage on your home and the money is paid to you either as a lump sum or a series of installments, depending on the type of reverse mortgage you arrange. Then you can use the cash to meet your needs. At the end of the term, you have a mortgage on your home. How you will make the mortgage payments at that time is an important consideration in your planning. (If you plan to sell your home, the mortgage would simply be repaid in full on the closing date of the sale, if the resale price were greater than the value of your mortgage.) Before You Act Cost Ask your lender about all the costs involved in setting up a reverse mortgage on your home. Common costs include: