Reverse mortgages are loans that you can take out against the value of your home; they don't have to be paid back as long as you still live in the house. Reverse mortgages are marketed specifically to people over 62 years of age. These loans are particularly attractive to senior citizens since many of them no longer work and have very little income, but they do own their own homes. With a reverse mortgage, they can get their hands on the tax-free cash they need to pay off rising medical expenses, home repairs or other expenditures.
Before reverse mortgages became an option in the late 1980s, retired homeowners had only a few options in terms of getting money out of their property. They could sell their houses and move into smaller places; they could sell and move in with family; or they could sell and rent something smaller. They could also have chosen to borrow money against the equity in their home, but then they would have had to make monthly payments without a source of income.
Now, with the option of reverse mortgages, the elderly have a way to take advantage of their "house-rich, cash-poor" status. In 2003, there were about 18,000 reverse mortgages in the U.S. By 2007, that number had grown to 107,000 [source: U.S. Department of Housing and Urban Development]. Of course, if you do decide to go for a reverse mortgage, you have to shop around, like with any loan. Discuss your options with family members; AARP even offers counseling to help you with your decision. So the next time you hear one of those ads with a celebrity saying, "If you're 62 years of age or older and own your own home…" you'll know what they're talking about and why.