Moving Forward With Reverse Mortgages

Homeowners are divided into two categories: those who carry the largest mortgages possible, and those who work to pay the loans off as soon as possible.

In addition to getting rid of a big financial headache, there's now even more of a reward for being a part of the second group.

Using a "reverse mortgage," the estimated 10 million seniors who have paid off their mortgages can now create a monthly "pension" check that will last as long as they live in their home.

Reverse mortgages allow older homeowners to convert part of their home equity into tax-free income. These plans are catching on -- but slowly. That's because seniors who had the good sense to pay down their mortgages are now hesitant to borrow against that home equity to supplement their monthly income.

That's understandable -- but it's a mistake. You should at least consider whether a reverse mortgage might be appropriate for you -- or your parents or grandparents who are "house rich" but income poor.

That's exactly what I did for my own 84-year-old father a few months ago. I helped him take out a reverse mortgage on his paid-up retirement condo. So you see, I'm putting my money where my mouth is. Or to be more accurate, I helped my dad to put his own money in his pocket, just as I'm advising you to consider.

Here's how reverse mortgages work, and where to get more information.

To get a reverse mortgage you (and your spouse or co-owner) must be at least 62 years old. But it's best to wait to make the move until you're at least in your 70s because the amount of money you can receive each month -- or in a lump sum -- is determined by the value of your home, your age and the current level of interest rates. The older you are, the more money you'll receive.