Are reverse mortgages a good idea for seniors?

For many seniors who have seen their savings accounts depleted since the economic recession, reverse mortgages have been an opportunity to unlock much-needed money from their home equity.

But a recent article from the New York Times says reverse mortgages come with a host of conditions and requirements, and that many seniors who have relied on these have lost thousands of dollars – and sometimes even their homes.

“There are many of the same red flags, including explosive growth and the fact that these loans are often peddled aggressively without regard to suitability,” Minnesota’s attorney general Lori Swanson told the newspaper.

According to the Times, many seniors are overwhelmed by the complicated options which come with reverse mortgages, and as a result they may make decisions which aren’t the best for their financial health.

A number of seniors who were interviewed said they decided on reverse mortgages because it was an opportunity for them to gain access to the equity from their homes, but when their spouses changed, the stipulations in their contracts meant they had to pay large sums of money in a short period of time. And if they didn’t, they would lose their homes.

What do you think? Are reverse mortgages a good idea to unlock home equity, or are reverse mortgages fraught with danger?