Home loan that goes into reverse

Question: At 72, I have no plans to leave my home. I have no pressing financial need but would like to make my financial burden a little easier. What are the pros and cons of taking out a reverse mortgage?

A: Many people are resorting to reversers, but because of high fees, it's best to wait until you really need the money.

Like any mortgage, a reverser is a loan that uses the property as collateral. The difference is that the borrower doesn't have to make monthly loan payments or have an income to qualify, although he or she must be at least 62.

Instead, the debt and accumulated interest charges are paid off only when the property is sold - even if that's not until after the borrower has died.

The loan can be taken as a lump sum, line of credit, or a fixed monthly income that can continue for the borrower's lifetime, even if the total received eventually exceeds the property's value. However the money is taken, it is tax-free, since it is a loan, not income.

Because the borrower makes no payments, interest is charged on interest. But the total owed - principal plus interest - can never exceed the value of the property.

The lender cannot foreclose or ever require you to pay the debt during your lifetime, except in some extreme cases such as bankruptcy.

Source: Philadelphia Inquirer