The Backwards Loan

Here's why reverse mortgages are the rage--and how they can hurt you

The buzz among homeowners continues to be about mortgage refinancing. Why? Because interest rates are still so low (6% for a typical 30-year loan). But what's more intriguing--and maybe a little scary--is the big surge in people taking out reverse mortgages. These are loans that let homeowners who are 62 or older take cash from their home equity and pay nothing back--not a cent--until they move out or die. Some reverse mortgages guarantee a fixed monthly payment for life (an annuity). By the latest measures available, the pace of new reverse mortgages has leaped 74% in just one year.

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