By Alan Suderman
THE ERICKSON TRIBUNE

Let’s face it—retirement can be very expensive. Couple skyrocketing health care costs and longer life spans with the fact that pensions aren’t what they used to be and you have a formula that many older adults are familiar with—the high cost of retirement.

“It’s becoming so hard for people to set money aside that the definition of retirement is changing,” says Jeffrey Voudrie, a Tennessee-based certified financial planner and syndicated columnist on financial topics.

Savings are often tied up in people’s homes when they reach retirement age. That’s why many are looking at ways to get money out of that investment to help with the cost of retirement. One way to do so is with a reverse mortgage.

A home loan in reverse
A reverse mortgage is essentially a loan you take against the equity in your house. Whereas, in a traditional  mortgage you make payments to increase your home equity and decrease the amount of debt you owe, in a reverse mortgage you are increasing the debt you have on your house and decreasing your ownership value.

Reverse mortgages have grown in popularity in recent years and are widely available. To be eligible for one, you have to be at least 62 years old and own a home. The amount you can borrow varies based on your age, the present value of the property, and the amount of equity you have in the house. Loan disbursements can be taken in a lump sum, monthly installments, or as a line of credit.

Not ‘free money’
But financial experts are quick to caution that reverse mortgages are not “free money” and homeowners should know just what they are getting into before pursuing one.