Reverse mortgages are different from other types of home loans.
 

Eligibility
All borrowers must be owners at least 62 years of age for most reverse mortgages, and occupy the home as their principal residence (where they spend the majority of the year).

Single family unit dwellings are eligible properties for all reverse mortgages.  Some programs also accept 2-4 unit owner occupied dwellings, along with some condominiums and manufactured homes.  Mobile homes and cooperatives are not eligible properties.

How They Work
Most reverse mortgage loans require no repayment for as long as you live in your home.  But they must be repaid in full--including all interest and any other charges--when the last living borrower dies, sells the home, or permanently moves away.

Because you make no monthly repayment, the amount you owe grows larger over time.  As your debt grows larger, the amount of cash you would have left after selling and paying off the loan (your "equity") generally grows smaller.  Under the HUD program you never owe more than the value of your home at the time the loan is repaid, even though the loan may outgrow the home value.  In that case, HUD will pay the difference.

Reverse mortgage borrowers continue to own their homes.  So you are still responsible for property taxes, insurance, and repairs.  If you fail to carry out these responsibilities, your loan could become due and payable in full.

What You Get
These loans can be paid to you all at once in a single lump sum of cash, as a regular monthly cash advance, or as a credit line that lets you decide how much of the loan to use, and when to use it.

The amount of cash you can get generally depends on your age, your home's value and location, and the cost of the loan.  The greatest cash amounts generally go to the oldest borrowers living in the homes of greatest value on loans with the lowest costs.

The amount of cash you can get also depends on the specific reverse mortgage product you select.  There may be very great differences in the amount of cash you can get from one reverse mortgage product versus another.

Some products (such as the federally insured Home Equity Conversion Mortgage) include a credit line that grows larger over time until you use it all.  Other credit lines do not grow larger, or do so at a lower rate for a shorter time.

What You Pay
Do not sign a service agreement with anyone to help you find a reverse mortgage lender or apply for a loan.  This help is available at little or no cost from a HUD approved housing counseling agency or your nearest HUD Office.  Applying for a reverse mortgage itself should only include the upfront cost of an appraisal (generally $250 to $350) and a credit report (about $50) plus standard closing costs that are generally financed using the loan proceeds.

The best way to compare the cost of these loans is to use the Total Annual Loan Cost (TALC) rates the federal Truth-in-Lending law (Regulation Z) requires lenders to disclose to you.

TALC rates are generally greatest in the first years of a reverse mortgage and grow smaller over time.  They can be especially high in the first years of a loan if you select monthly advances or use only a small part of a credit line.  TALC rates are generally lowest if you live longer than average for persons your age, if you home's value grows at a lower rate, or if you get more of the loan in the earlier years of the mortgage.

There may be very great differences in the TALC rates between one reverse mortgage and another.  Ask for TALC rates early in your decision making and make sure you understand all the reasons for these cost differences.

Other Choices
You may also be eligible for other programs providing cash or services that do not involve a loan against your home. Some of these programs are: