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FONZChances are, you’ve seen Henry Winkler (aka Fonzie) and Fred Thompson on TV lately.  Are the reverse mortgages they’re hocking snake oil, or smart moves?

First, let’s understand what a reverse mortgage is.  A bank is making you a loan, and sending you the money.  The loan is collateralized by your home’s equity.

There are no “payments” required on a reverse mortgage.  Rather, the lender adds a monthly interest charge to the loan amount and carries the balance forward until you die or sell the house.

When you do – the loan balance including interest is repaid from the sale proceeds.  If the sale proceeds are insufficient – special HUD insurance makes up the shortfall so there is no lingering debt to you or your heirs.

You own the home 100% – and you always will.  Reverse mortgages are available to any homeowner over age 62 – even if you still have a regular mortgage balance.

Okay – with that background – when and why would you consider a reverse mortgage?

First, if you don’t plan to keep your home for at least 5 years – a reverse mortgage is not for you.  But if you do, the proceeds can be used for anything you wish.

You might use a reverse mortgage to pay off a regular mortgage and eliminate that payment from your monthly budget.  If you don’t have a regular mortgage, consider putting the reverse mortgage money into a safe instrument where it remains accessible; can provide an income; and will extinguish the reverse mortgage so your home can pass free and clear.  Reply to learn more.

That equity is doing nothing for you anyway – leverage it the smart way – with a reverse mortgage.