Common Uses for a Reverse Mortgage:

Receive monthly income

Payoff existing mortgage-No more monthly payments-ever!

Afford home healthcare and assistance

Home repairs and improvements

Protect heirs from Medicaid state recovery

Charitable and family gifting

A Reverse Mortgage “is” a Home Equity Loan that:

Requires no income or credit verification

Offers an attractive interest rate– app. 6%

Requires no repayment until the house is sold

A Reverse Mortgage “is a loan that”

Never impacts Social Security payments

Never give up the title or pay taxes on income

Never owe more than the value of the house

Never have any restrictions on how funds are received or used

        Someone who is 62 or older and owns a house that is fully paid for or has a relatively low mortgage (>50% equity) can be a candidate for a reverse mortgage. Unlike a regular (or forward) mortgage, where you have to make monthly mortgage payments, with a reverse mortgage you borrow money, but do not have to repay the loan until you either sell the property or die. At that point, the lender is repaid the principal and all of the accrued interest. The lender cannot foreclose on the property or in any way interfere with ownership, unless the owner is causing waste or damage.

There are three forms in which a homeowner can get this money, which is tax-free because it is from the equity in the house:

• Single lump sum of cash.
• Line of credit so that the money is available as and when it's needed.
• Monthly cash advance.

There are a number of reverse-mortgage programs available. Perhaps the most popular is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration. This is the only reverse mortgage that the federal government insures.

To be eligible for the HECM, all owners of a home must be at least 62, must use the home as the principal residence, and cannot be delinquent on any debt to the IRS. The home must either be a single-family residence, or a one- to four-unit building. Some condominium units that have received approval are also eligible. Cooperative apartments and most mobile homes are not eligible.

How much money can homeowners take out? That depends on a number of factors, including ZIP code, age and the current appraised value of the property. There's a handy calculator on the Internet at www.rmaarp.com, a site run by AARP, the senior citizen group.

Another program available to homeowners is called the Home Keeper; it is sponsored by Fannie Mae. Although it is similar to the HECM, there are some differences. For example, the loan limits for the HECM will vary depending on the location of the house; Home Keeper loans are limited only by the Fannie Mae guidelines. If a borrower opts to take the money as a line of credit, the unused portion of that line can increase over time with the HECM but will remain fixed with the Home Keeper.