Using a reverse mortgage to make your mortgage payments?
Reverse mortgages have long been thought of a creative way for retirees to generate income: By slowly giving up equity in their homes over time, they could generate cash for their living expenses. When they no longer needed the house, it could be sold and the bank could be paid back with the proceeds. The AARP has quite a bit of information about reverse mortgages.
But according (subscription required) to the Wall Street Journal, reverse mortgages are gaining favor among those seeking to avoid foreclosure. Some home owners are trying to obtain reverse mortgages on their homes, then offering their lenders the proceeds in an attempt to stave off foreclosure.
This strategy will only work for homeowners who have substantial equity in their homes -- often retirees who took out home equity loans and are having trouble making the payments.
With a complex product like a reverse mortgage, be sure to consult with a fee-only financial adviser before you do anything. Don't listen to a salesmen -- their job is to sell you a mortgage, whether you like it or not.