Are reverse mortgages a better way to go than bankruptcy? This question doesn’t have an easy answer, and you should always look at your own circumstances before making a decision. It’s important to realize that these kind of decisions have long-term implications, but there are some things we can say about each of these financial options.
Who qualifies for a reverse mortgage? If you are at least 62 years old and have home equity, then you qualify for a reverse mortgage. These are loans that are specifically meant for seniors with home equity.
For example, you might own a home free and clear, which means you don’t have to make any future payments on the mortgage or to a bank. You can borrow against this equity, and you will receive monthly payments over a certain time. You won’t have to repay anything unless you move to another house. However, this does have to be repaid sooner or later (if not by you, then by your heirs).
You might think that this sounds like a great deal, but don’t forget that the reverse mortgage has to be repaid at some point. If you don’t repay the loan within your lifetime, then the lender will end up taking your house and leaving your children or other heirs with nothing. Of course, this might not be a big deal to you if you do not have any living relatives or if your immediate family members are doing quite well. You might need to use the money for your own needs, and you certainly have the right to do so. However, you should think carefully about the consequences including the possibility of a bank taking over your house at some point.
It’s important to get all the information because there are many details you need to be aware of. For example, if you decide to get a reverse mortgage, the government may change your benefits for Social Security or Medicaid. Also, you should never let a lender push you into making a decision that you’re not comfortable with. Always think carefully, and remember that the loan has to be repaid eventually.
Think carefully before putting your house on the line. If your main concern is getting out of debt, it would be wise to at least consider the possibility of bankruptcy. We’re not saying it should be your first choice or that you should jump into it impetuously. However, it may be a better option because you can eliminate your debt without putting your house in jeopardy (unlike the reverse mortgage).