Over the last decade, reverse mortgages have been marketed as an easy way for seniors to cash in their home equity to pay for living expenses. However, many have learned that improper use of the product – such as pulling all their cash out at one time to pay bills – has led to significant financial problems later, including foreclosure.
In actuality, there are some cases where reverse mortgages can be helpful to borrowers. However, it is imperative to do extensive research on these products before you sign.
Reverse mortgages are special kinds of home loans that let borrowers convert some of their home equity into cash. They come in three varieties: single-purpose reverse mortgages, Home Equity Conversion Mortgages (HECMs) and proprietary reverse mortgages.