It’s pretty surprising how many financial instruments there are out there. Some you may be familiar with and some not. That’s particularly the case as different countries have different ideas and products that are introduced from time to time. For example, today I came across Reverse Mortgages, a concept I had never heard of before. It was on a U.S. based website, and I’m not sure if there are similar products here in the British Isles that you can just walk into a financial institution and pick off the shelf.
Here’s how a reverse mortgage works. A reverse mortgage is really just an equity loan secured by your home, designed to defer the mortgage interest. This means that you can borrow a sum of money against the house you’re living in, which will be repaid (together with interest) on your demise or when you decide to move out of the house. You can choose to pay it back at any time, but if you decide not to, it will be down to your heirs or estate to settle the amount after they have sold your house. I don’t know how it works in other countries, but based on what I was reading in the U.S. you have to be 62 years old or older and have substantial equity in your home before you are eligible for a Reverse Mortgage.
So, is a Reverse Mortgage a good idea or not? Well, it all depends on your circumstances I guess. Personally I like the idea that my property will be inherited by my kids, so I would probably never go down that route, but I’m sure there are people out there who would be interested in something like this. I can think of a number of cases, like if there are no heirs, or if someone needs a cash infusion which they are planning to pay off, then it might be just right for them.
The thing about investments and financial products is that you should always get advice from the experts. Find someone who you trust for advice and ask them what they think. And don’t be afraid to get a second opinion either. I don’t consider myself an expert in this field, so would always look to learn more before deciding to embark on something like this. Remember, a perfect solution for one person may not necessarily apply to someone else, as everyone’s circumstances are different.