Reverse Mortgage

• A reverse mortgage is a loan in which you receive payments based on the equity in your home, and the money only has be repaid if you sell the house, give it up as your primary residence or the last surviving owner dies. If you have sufficient equity in your home, you can obtain a reverse mortgage to pay off a small remaining balance on an existing mortgage. The Department of Housing and Urban Development manages the home equity conversion mortgage, and they are federally insured. Two additional types of reverse mortgages exist--proprietary reverse mortgages, which are offered and backed by private lenders; and the single-purpose reverse mortgages that are usually provided by nonprofit lenders or state and local governments and are designed to meet specific needs like home repairs or property taxes.
  
  

Qualifications

• To qualify for a reverse mortgage you must be 62. You must own your property outright or have a minimal remaining mortgage balance. There are no minimum income or employment qualifications and closing costs can be financed into the mortgage. You must occupy the property as your principal residence, and you cannot have any delinquent federal debts. You can apply for an home equity conversion mortgage through an FHA-insured lender. As a requirement of your approval for the reverse mortgage, you must obtain loan counseling to learn how this type of mortgage works and about the alternatives.
  
  

Loan Amount

• The amount you can obtain with a reverse mortgage will depend on several factors. In addition to your county's regulations regarding reverse mortgage loan amounts, the age of the youngest borrower also goes into determining the maximum loan amount. More specifically, the estimated life expectancy of the youngest borrower is a factor. Your home's value and equity, the type of reverse mortgage you choose and interest rates also help determine the loan amount. The Truth in Lending Act affects reverse mortgage laws, meaning you can expect full disclosure of the terms of your loan.
  
  

Payment Options

• With HUD's home equity conversion mortgage, you can choose how to receive your funds. They will be dispersed to you either as a line of credit, fixed monthly payments or a combination of both. Other types of reverse mortgages will allow you to receive the funds in a lump sum. Reverse mortgage payouts do not affect your eligibility for Medicare or Social Security. Typically, you will not pay taxes on loan proceeds, but you will not benefit from a tax deduction either, until you have repaid some or all the loan.