A reverse mortgage is used to unlock the equity in homeowner’s ages 62+ homes who need additional income. Reverse mortgages enable seniors to cash in on the equity in their homes without giving up ownership of the property. It is tax-free income, it is a loan, and payments are deferred until the homeowner dies, sells the property, or no longer resides in the home full-time. The homeowner receives this money without having to make loan payments, sell the property, or transfer the title.

1. What types of homes are eligible? Single-family homes, two to four unit multi-family housing, manufactured homes (built after June 1976), townhouses, and condominiums are eligible for reverse mortgages.
2. Basic eligibility requirements:
   1. Be at least 62 years of age
   2. Own the property outright or have a low enough mortgage balance that the mortgage can be paid in full at closing using proceeds from the reverse mortgage loan
   3. Live in the property
   4. Receive third-party financial counseling from a Department of Housing and Urban Development-approved counseling agency
3. How much money you can get depends on five factors:
   1. The age of the borrower, or of the age of the younger spouse; the older the homeowner, the more money the homeowner is eligible to receive
   2. The appraised value of the property, minus the cost of any health or safety repairs required to bring the home up to code
   3. The lending limits (where applicable); lending limits vary on a county by county basis
   4. Interest rates, which are determined by the U.S. Treasury or LIBOR Index
   5. The payment plan selected by the borrower
4. Loan monies can be disbursed in a variety of payment options:
   • Tenure: fixed, equal monthly payments that will continue for as long as at least one borrower is living in the property as a main residence
   • Term: equal monthly payments for a predetermined period of time
   • Line of Credit: Funds are available for disbursement in lump sums or installments on dates and in amounts at the borrower’s discretion until the credit line is depleted
   • Modified Tenure: Combines credit line with monthly payments for as long as the borrower is living in the property as a main residence
   • Modified Term: combines credit line with monthly payments for a predetermined number of months chosen by the homeowner
5. Loan payments are deferred as long as the property remains the borrower’s primary residence. There is no obligation to repay the loan until the owner dies, the home is sold, or the owner otherwise vacates the property for 12 consecutive months (for example, to move into an assisted-living facility).
6. If you have an existing mortgage?
   • Homeowners with an existing mortgage may still qualify, if certain conditions are met. The reverse mortgage must be the first lien on the property, so any existing liens on the property, including second mortgages, must be repaid in full.
   • Reverse mortgage funds can be used to repay the existing mortgage balance. If the reverse loan will not entirely cover the existing mortgage, the borrower can use funds from his or her savings or borrow from a family member or friend. The borrower cannot, however, take out a loan to repay the difference.
   • Using the entire reverse mortgage loan to pay off the existing mortgage balance might seem counter-productive, but the homeowner will no longer have to make monthly mortgage payments.
7. You will not end up owing money on your house. When the loan ends (after the borrower has died, sold the house, or moved out of the property for 12 consecutive months), the reverse mortgage is repaid using the proceeds from the sale of the house. (The borrower’s heirs may also repay the loan by refinancing the property with a traditional mortgage.) If the proceeds from the sale of the property are enough to repay the loan, the lender covers the difference.
8. If the proceeds from the sale exceed the loan balance, the homeowner (or the homeowner’s heir) receives the difference.
9. How can I spend the money? The funds from a reverse mortgage can be used in any way the homeowner the homeowner deems fit. The entire loan disbursement can be moved into investments, or the borrower can spend the money any way they wish.
10. Is there any credit, income, or medical requirements for a reverse mortgage? No. Seniors ages 62 and older who own their homes or have substantial equity are eligible for a reverse mortgage. There are no income or medical requirements, such as credit checks, income verification, or physicals.