Reverse Mortgages

Reverse mortgages are not very common any more. In this situation the bank actually makes payments to the homeowner and upon death or a specified amount of time the homeownership will revert to the bank.

There are several types of reverse mortgages:

1. Tthe federally insured Home Equity Conversion Mortgage (HECM), administered by the Department of Housing and Urban Development (HUD)

2. Single-purpose reverse mortgages, usually offered by state or local government agencies for a specific reason

3. Proprietary reverse mortgages, offered by banks, mortgage companies, and other private lenders and backed by the companies that develop them.

To qualify for a reverse mortgage, you must be at least 62 and have paid off all or most of your home mortgage. Income is generally not a factor, and no medical tests or medical histories are required. If you seek an HECM, you also must undergo free mortgage counseling from an independent government-approved "housing agency." Financial institutions offering proprietary reverse mortgages may require similar counseling or homeowner education.

The amount you can borrow depends on your age, the equity in your home, the value of your home, and the interest rate. If it's an HECM, federal law limits the maximum amount that can be paid out.

You can be paid in a lump sum, in monthly advances, through a line of credit, or a combination of all three.

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