http://www.mortgagenewsdaily.com/06042015_cfpb_reverse_mortgages.asp

Older Americans are being warned that ads touting reverse mortgages "that seem too good to be true" might be just that. Rather slyly using a tag line from one popular reverse mortgage advertisement, the Consumer Financial Protection Bureau (CFPB) has released results of a focus group study that found many participants were left with misimpressions about the product after viewing ads; perhaps that they are not a loan, are a government benefit, or would ensure they could stay in their homes the rest of their lives.

CFPB Director Richard Cordray, in a conference call with reporters regarding the study said, "As older consumers consider reverse mortgage loans to tap into their home equity, they need to be careful of those late night TV ads that seem too good to be true. It is important that advertisements do not downplay the terms and risks of reverse mortgages or confuse prospective borrowers."

The Director talked about the aging population with more than 10 thousand Americans joining the 45 million who are already over age 65 every day. The average American is now spending about 20 years in retirement and for many much of their net worth is tied up in their homes. It is difficult for them to access that wealth without selling a home they may wish to remain in. While some turn to a home-equity loan, "for others, an option that can seem enticing is a reverse mortgage."

The main thing you have to understand is that at your( and your spouse's) death the bank takes the house or your heir pays back all the money with interest if they want the house. So if you have a $200,000 house and die after payments of $50,000, if you have any heir and they can't come up with $50,000 then the bank makes $150,000 profit.

If you have no heir it might be a consideration but they do seem to get a lot of bad press. See post #1.

If the last spouse dies, and they owe 50k, the estate typically has 6 months to pay it. (interest will accrue during the 6 months)

They can sell it for 200k, then pay the 50 grand keep the 150

pay the 50k if they want to keep the house (getting a 50k loan on a house worth 200k shouldn't be too difficult)

or turn the keys over (the reverse mortgage company would be less motivated to get maximum selling price, so they might sell it for 170k to get a quick sale. Then the bank would keep 50k, and send 120k to the estate.

And reverse mortgages are non recourse loans, so if the family owes 200k and the house is worth 170k, then the family can turn the house over, and the reverse mortgage company will loose 30k (but can not go after the estate for the money they lost.

My head spins just reading it but I am glad the OP is getting a fuller picture of the options and consequences.

You can get a lump sum on the equity, or get monthly payments, or get a line of credit on your equity, or get a combination of two.

As some have noted, if there are no heirs for the home, and you need the extra cash, just the fact of no monthly mortgage payment may be enough incentive for some?

The law now requires, since April 27, 2015, that the borrower get 3rd party counseling before making their decision.

Your paid off house can support you ( supplement your income) and when you die...who cares what happens to the house...BUT if you have someone you want to inherit your house, you are better off to sell, downsize & bank the profits..

I used to admire the Fonsey till he made that ad ,the other actor / political hack is a total prostitute .

I would shy away from them .

And don't have hiers that would need it more then you need it now...then I would say check it out, do some research...maybe the AARP has some stuff on it. You could also check out companies through the BBB.

But there are sharks out there.

In the end it is not your house! Listen carefully to the ad! You are able to continue to do this "AS LONG AS YOU STAY IN YOUR HOME". Now read this again!
Now what happens when or if you need to leave your home? Like for a nursing home in the end? It's not yours to sign away. You will go into lousy old home. Is great as long as you stay in your home. So plan on dying there with some home care in the end if you're pretty healthy.

Fred Thompson plugging for it should be enough warning!

How old the person is, etc. In general, it's not a good proposition for borrowers below about 72-75.

For older people who are poorer, getting that extra cash each month can be a godsend. But remember that the cash payment stays fixed. Doing it too early can cause a problem later, along with other problems detailed below.

Also, you are draining the equity in the home, so if you wanted that to go to the heirs, assume it won't.

And finally, after death the loan comes due, so make sure you go over the implications for the surviving spouse. If both spouses are not named on the mortgage, you are potentially setting up a very bad situation. Please read this:
http://www.aarp.org/money/credit-loans-debt/info-06-2011/reverse-mortgage-protection-for-surviving-spouses.html

Here is a brief discussion from the FHA:
http://www.fha.com/fha_reverse

Taking out these loans too early is generally a losing proposition, because the interest is charged on the amount withdrawn. Lower interest rates now (and they are not really low) mean little now given that you'll be accumulating them over an additional decade.

Also, if you are not sure that you are going to be able to stay in this home the rest of your active lives, it's a really bad idea. If it's not a home in which you can live with some degree of old-age disability (accessible, don't have to use upstairs, etc), consider selling now and rolling over the proceeds to a new home where you can live.

Finally, for younger retirees who expect to be in the home for more than a decade on fixed and moderate-to-low incomes, taking out a reverse mortgage can drain equity that you will need to do necessary house repairs, so either defer the loan or go to a line-of-credit option, maybe with a small fixed payment that covers property taxes, so that you will still have some cash available when you really, really need to fix something.

Best of luck - hope this helps.

These loans are being pushed now because they are favorable for lender's portfolios, not necessarily because they are right for the borrower.

For younger would-be borrowers who just need a small amount of extra income to get by now, I strongly encourage part-time work instead. This could include watching much older persons, lawn work/house maintenance for much older persons, part-time employment at a store or whatever, or even online work through the internet, of which there is a lot.

The online work is actually a good option for many older persons with good internet connnections, especially for couples.