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Later in life, parents often find themselves in a difficult financial situation. To remedy the situation, some consider the use of a reverse mortgage on their residence. It is my assessment that doctors whose parents are considering a reverse mortgage should be offered this advice: "Break glass only in an emergency." In limited situations, a reverse mortgage can be a useful tool for maintaining quality of life. I further qualify this assessment by adding that it should only be a measure of last resort.
What is a reverse mortgage?
A reverse mortgage is a home loan that lets a homeowner age 62 or older take a portion of the equity in the home in cash. No repayment is required until the borrower is no longer using the home as a principal residence. Reverse mortgages available through the U.S. Department of Housing and Urban Development are federally insured. The use of reverse mortgages is on the rise, according to the National Reverse Mortgage Lenders Association (NRMLA). They cite a statistic that indicates home-equity conversion mortgages have increased dramatically. In 2003, reverse mortgages increased 76 percent from the previous year.
When appropriate, a reverse mortgage can...