In a reverse mortgage, you never make a mortgage payment while you live in your home. As a matter of fact, the opposite actually occurs: the bank pays you money. You can get the money from the bank in one of three different ways: lump sum, line of credit or monthly payments.



Because you get payments from the lender, the debt in your home increases as time goes by and you get more money from the loan. At the same time, the equity in your house decreases as you get those payments.

When your reverse mortgage becomes due - because you move out of the home or you die -, the debt accumulated in the property may be large and your equity in the home small. . If you have received a lot of payments, there may be no equity left at the end of the loan. However, it's important to know that you can never owe more money than your home's value.

Since you won't make any monthly repayments, you don't need any income to qualify for the loan. You may have no income and still qualify for a reverse home mortgage. Also, your credit history is of none or little concern.

The main requirements when applying for a reverse mortgage are that you are at least 62 years old, and that there is enough equity in your home.

The amount you can borrow depends on three factors:

Your age

The current market interest rate

The home appraised value or the FHA's reverse mortgage limit for your area

In general, the older you are, the bigger the appraised value of the home and the lower the interest rates, the more money you can borrow with a reverse mortgage.

You need to remember that since you keep ownership of your home, you are still required to pay your real estate taxes, insurance, maintenance costs, etc.

Senior Reverse Mortgage Benefits

A reverse mortgage has many pros associated with it. These are some of the main ones:

You don't need to leave your home. You can stay in your home for as long as you want.

You don't need a monthly income to qualify. The bank is the one paying you monthly payments.

You don't have to make any payments on a reverse home mortgage

You can't ever loose your home because you don't make mortgage payments.

You can never be thrown out of your home for as long as you live in it. However, you still need to make real estate and insurance payments.

You can use the money from the reverse mortgage for any thing you want.

The funds are usually tax deductible

Most reverse home mortgages have no earnings limitations

Your Social Security and Medicare payments are usually not affected

Reverse Mortgage Drawbacks

As with any other type of mortgage, reverse mortgages have some drawbacks to using them. Of course, many of them are only potential and depending on your individual situation. Nevertheless, it's a good idea for you to know about these drawbacks before choosing a reverse mortgage.

These are some of the cons you need to consider before applying for a reverse mortgage:

Most all reverse mortgages have variable interest rates. Your rates will vary as the market changes.

Since reverse mortgages work by decreasing the equity in your home, you can use up most of the equity, leaving little money left for you and your heirs. However, a "non-recourse" clause found in most reverse home loans prevents either you or your heirs from owing more money than your home is sold forth.

Since you are retaining ownership of your home, you are responsible for the real estate taxes, utilities, insurance and maintenance.

Most lenders charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the duration of the home mortgage. These fees are already included in the mortgage.

The interest portion of a reverse mortgage is not deductible in your tax returns until the home loan is paid off (in part or whole.)

There is usually a cheaper solution to your problems (credit line, refinancing your existing mortgage, etc.)

To decrease some of these drawbacks and to make sure you get a good deal on a reverse mortgage, make sure you get your reverse mortgage through a reputable company who will educate you throughout the reverse mortgage loan process and beyond.