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    Reverse Mortgage Explained

    When it actually helps — and when it ruins families.

    What it is

    A loan against your home equity for homeowners 62+. The bank pays YOU (lump sum, monthly, or line of credit). You don\'t make payments. Loan + interest is repaid when you sell, move, or die.

    Most are FHA-insured "Home Equity Conversion Mortgages" (HECM).

    Real costs (not always advertised)

    • Origination fee — up to $6,000.
    • FHA mortgage insurance — 2% upfront + 0.5%/year of loan balance.
    • Interest rate — usually higher than regular mortgages.
    • Compounding — interest accrues on the growing balance, doubling debt every 8-12 years.
    • Property taxes, insurance, maintenance — you still pay these. Failure to pay = default = foreclosure.

    When a reverse mortgage CAN make sense

    • You\'re 70+, paid-off home, plan to stay there until death.
    • Home equity is your biggest asset and you have low retirement income.
    • You want to delay Social Security, using a HECM line of credit as a bridge.
    • Your spouse and you both 62+ are listed as co-borrowers.
    • You don\'t care about leaving the house to heirs.

    When it\'s a TRAP

    • You might move within 5 years (heavy upfront fees, bad ROI).
    • You can\'t afford property tax/insurance — you\'ll be foreclosed.
    • Spouse not on the loan — they may lose the house when you die.
    • You want to leave the house to children — usually consumes most or all of equity.
    • You\'re using it for risky investments (some salespeople push this).
    • Aggressive sales pitch with TV celebrity — go elsewhere.

    Required counseling — get the most out of it

    Federal law requires you to attend a free HUD-approved counseling session before getting a reverse mortgage. Treat it seriously. Bring a family member. Ask hard questions about long-term costs.

    Find a counselor at hud.gov.

    Alternatives to consider first

    • Downsize — sell, buy smaller, pocket the cash. Often nets more than reverse mortgage.
    • HELOC — home equity line of credit. Cheaper but requires monthly payments.
    • Sell to family + lease back — child buys your house at fair value; you rent it back. Keeps the asset in family.
    • Property tax deferral — many states let seniors defer property tax until home is sold.
    • Cut expenses, increase income — part-time work, downsizing.

    Final word

    Reverse mortgages aren\'t inherently bad — but they\'re very expensive and complicated. Talk to a fee-only fiduciary advisor BEFORE signing. Bring an adult child to every meeting. Don\'t sign in the first meeting.