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Is a reverse mortgage your answer to debt?

Many older Americans are facing increasing offers for home equity loans in the form of reverse mortgages. If you're dealing with debt issues just before or after you retire, a reverse mortgage may seem like a great idea. However, taking out such a mortgage doesn't get rid of the debt -- it just moves it to another format.

AARP notes that reverse mortgages can be an expensive debt, so they aren't usually the answer for financing optional things such as vacations. The organization does say common uses of the reverse mortgage can include paying for emergency medical expenses, funding repairs to a home during retirement or funding a move to a nursing home or assisted living. In these cases, the option of a reverse mortgage can mean the difference between a less-than-desirable solution and one that you are happy to live with.

Because you will eventually max out your home equity line, you don't want to tap into reverse mortgage options too early or too often. If you can't pay off your debt now, you probably won't be able to pay off your reverse mortgage, which means that line of credit might not be available when an emergency arises.

Instead of locking yourself in another form of debt, you might want to consider other debt management tactics, including bankruptcy. With the right help, you can even file for bankruptcy without losing your home. You might even be able to keep some of the ability to draw on equity in the future.

Understanding your situation and how to best deal with your debt can help you avoid issues later in life. No financial fix is the right solution for everyone, which is why it's important to consider all options.

Source: AARP, "5 Questions To Ask Yourself Before Considering A Reverse Mortgage," accessed Oct. 16, 2015

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