Betty and John, are in their mid-seventies and are currently weighing advantages and disadvantages of a reverse mortgage as a way of freeing up some cash. The couple purchased their home 45 years ago for about $14,000 since then home values have skyrocketed and recent single family homes in their neighborhood have been selling for a minimum of $160,000.

Like Betty and John, if you’re considering a reverse mortgage it’s important to do some research prior to making a decision. You not only need to understand basic principles of this kind of mortgage but you also need to look at all advantages and disadvantages of a reverse mortgage.

Essentially a reverse mortgage is a loan that permits homeowners 62 years of age and older to borrow against equity in their homes without having to sell it. Further, you don’t have to give up title or take on a new monthly mortgage payment.

A reverse mortgage loan is tax-free and needs only to be repaid when borrower (or in case of Betty and John, when surviving spouse) dies or sells home. At which time, reverse mortgage loan must be repaid in full, including all interest and other charges.

When examining advantages and disadvantages of a reverse mortgage it’s also important to consider both process and related costs of obtaining a reverse mortgage. Unlike a conventional mortgage, with a reverse mortgage, homeowner (the potential borrower) must meet with a reverse mortgage counselor. References for counselors can be obtained from banks offering reverse mortgages or U.S. Department of Housing and Urban Development (HUD).

Several lenders offer this type of flexible mortgage that is linked to a current account, and is called a current account mortgage. Your mortgage account and your bank account are merged into one and you are issued with a cheque book and cash card just as you would with an ordinary current account.

You pay your salary into account and a proportion is automatically used to meet your monthly mortgage repayment. You can pay as much off your mortgage as and when you like, according to monthly minimums set by mortgage lender. You can also use your savings to put against your mortgage, paying mortgage off more quickly and reducing interest payments.

A current account mortgage allows you to run a current account against mortgage allowing any money in current account to offset against mortgage and reduce overall interest you pay on loan. This in turn will reduce mortgage term.