Requirements

• The requirements to qualify for a reverse mortgage are fairly simple. An applicant must be 62 or older. At least one of the borrowers must continue living in the home. A borrower must own the home free and clear or owe just a small balance on the mortgage. The property taxes and homeowner's insurance must be kept current, and the home must be maintained in good condition. In most cases, there are no income restrictions, therefore, low- to moderate-income homeowners can qualify.
  
  

Eligible Homes

• A home occupied by the borrower qualifies for a reverse mortgage. A one to four multiple housing unit in which the borrower lives in one of the units also qualifies. Manufactured homes which meet FHA requirements and HUD approved condominiums may be eligible as well.
  
  

Amount Borrowed

• The cash from a federally insured reverse mortgage may be used for any purpose. How much money you can borrow depends on the borrower's age and current interest rate. A reverse mortgage is based on the lesser of the appraised value of the home or FHA mortgage limits for the county where the home is located. The more your home is worth and the lower the interest rate, the more money you can borrow against the equity. You can also qualify for more cash the older you are.
  
  

Warning

• Reverse mortgages funded by the U.S. Department of Housing and Urban Development (HUD) have higher interest rates than traditional home mortgages. The costs to process the loan may include an origination fee and other closing costs. When you sell the home, you will be required to repay the reverse mortgage loan in addition to the accumulated interest and other lender fees. However, any equity remaining in the home after repayment belongs to the borrower or his or her heirs.
  
  

Repayment

• When you borrow money by taking out a reverse mortgage, the lender can make payments to you in different ways. You can receive equal monthly payments for the time you occupy the property or for a fixed number of months. The loan can be disbursed as a line of credit where you request payments only when you choose. You may also choose to receive the loan as monthly payments in combination with a line of credit either for as long as you live in the home or for a specified number of months.
  
  

Other Types

• Proprietary reverse mortgages allow homeowners the option of borrowing more money for a home with high value. However, because the borrower's home is the collateral for the loan, the availability of this kind of reverse mortgage depends on the condition of the real estate market. To offset a recent decrease in these kinds of loans caused by declining home values, Congress passed legislation early in 2009 significantly increasing reverse mortgage loan limits for a time (see References section). Another type of reverse mortgage for which senior homeowners can apply is the single purpose reverse mortgage offered by government agencies or nonprofit organizations. These loans cost less but can only be used for the purpose specified by the lender. An example would be obtaining a reverse mortgage in order to make home improvements.