Let's dispense with a few items that we need to understand. First, you need to be at least 62 years old to qualify for a reverse mortgage. Second, you don't need to own your home free and clear (you might still have a mortgage outstanding). Third, you are not selling your home to anyone. You own it, period. All you're doing is borrowing money from someone. In the future when you do sell your home, the loan will be repaid from the proceeds. (IMPORTANT NOTE: you will never go underwater on the loan. If the proceeds from the sale don't cover the loan, that's tough luck for the lender. There's no recourse).
Why would someone want a reverse mortgage? Here's one short answer; it may be the largest asset you own and you could have a lot of equity (money) sitting there which you need. And, you want to keep living in your home. A reverse mortgage can provide you access to your equity as lump sum, a monthly sum, or as a line of credit to be used whenever.
What's the downside? First, its a mortgage and you will need to pay closing costs. These are normally rolled into the “mortgage” so you don't have out of pocket costs. Second, you will need to pay insurance, in the form of an interest rate, for this loan (just like you would pay a private mortgage insurance fee (PMI) for a regular mortgage with little or no money down. And third, you need to remember that as you spend the money, you're.... spending your money! So its not to be spent frivolously.
Here's what I want to tell you. There are situations where a reverse mortgage can be a huge benefit in your retirement. It can be the reason you have a successful retirement income. I know there's a lot of old information and stories about the abuses of reverse mortgages that you may hear. What's great is that the federal government actually heard them, and has done something about it.
As I said the beginning, there's a lot to know about reverse mortgages. I have a pretty good understanding on these, and who can benefit from them. Feel free to give me a call if you want to discuss this. (ps. I don't sell or provide reverse mortgages. Like everything I write about, it's not to sell you something).