Are you considering using a reverse mortgage to consolidate your credit cards and other debt? Americans over 65 are going deeper into debt at a faster rate than other groups, according to a recent study by Demos, a public policy group. That’s largely because many seniors have taken huge hits to their retirement portfolios and are dealing with rising health care costs. Here’s what you need to know about getting a reverse mortgage for debt consolidation.

Seniors Rack up Credit Card Debt
Low- and middle-income people 65 and older had an average credit card debt of $10,235 last year, up 26% from 2005, according to the study. Credit card debt for all borrowers rose only 3% to $9,827 during that same period. People over 65 also reported the highest amount of credit card debt due to medical expenses, averaging $3,988.

Pros of Reverse Mortgages
So should you use a reverse mortgage to pay down debt? In some cases it may make sense. That’s because reverse mortgages:
—Allow you to convert some of your home equity into cold hard cash
—Don’t require you to make monthly mortgage payments
—Will pay out more money the older you are
—Can be used for anything you wish
—Don’t have to be paid back until you move or die

Cons of Reverse Mortgages
However, it’s important to understand some of the limitations of getting reverse mortgages. A reverse home loan:
—Can’t fix any poor spending habits you may have that contributed to your debt
—Could cut into the amount of any inheritance you intend to leave to your kids
—Could be called in early if you don’t keep up with tax and insurance payments
—Could impact your ability to apply for Medicaid and Supplemental Social Security benefits

Using a reverse home loan could help you pay off credit cards, auto loans, and other debt. Just make sure you understand how a reverse mortgage works so you can make an informed choice. Get reverse mortgage quotes from several lenders here.

This entry was posted on Friday, August 7th, 2009 at 4:12 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.