Revival of reverse mortgages reported

Many mortgage lenders are starting to give senior borrowers the ability to convert home equity into cash through a reverse mortgage. Homeowners over the age of 62 can draw down on their home's equity for cash in one lump sum, a line of credit or through monthly payments from lenders.

The Wall Street Journal reported MetLife Bank originated 10,512 reverse mortgages, a 171 percent increase compared to 2010. Many other lenders are also increasing their reverse mortgage approvals as more consumers are looking for cash despite a volatile stock market and difficulty refinancing their home loans.

However, reverse mortgages come with hefty fees, such as origination fees that can cost up to 2 percent of a home's value, the source reported. Closing costs are about 2 percent of the home loan, as well.

But a reverse mortgage is a smart move for senior citizens in need of funding for retirement. AARP reported more than 600,000 reverse mortgages have been approved since the late 1980s, three-quarters of which were originated in the last five years. A reverse mortgage allows borrowers to stay in their homes while still having access to cash for various needs. As the loan increases, the home equity decreases, but the home can regain value when the market recovers, The Daily Tribune reported.

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