ReverseMortgage

Repayment of the reverse mortgage is deferred until the borrower is no longer living in the home.

In a typical mortgage, a home owner pays a monthly amount (mostly interest, a little principal); after each payment, the owner has more equity in the house.

After a certain amount of time (typically 30 years), the mortgage will be paid off and the equity in the house will be equal to its value (it will be completely "owned").

In a reverse mortgage, the home owner pays nothing each month so that the owned share of the house actually decreases over time. If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third HUD reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house.

Reverse Mortgage Requirements

To qualify for a reverse mortgage in the United States, the borrower must be at least 62. The borrow must pay off any existing mortgage(s) with the proceeds from the reverse mortgage and, if needed, additional personal funds.

There are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose. A pending bankruptcy that has not been finalized may, however, slow the process. Some types of dwellings, such as lower-value mobile homes, do not qualify. Before borrowing, applicants must seek HUD approved counseling.

Reverse mortgages are offered by some state and local governments. These "public sector" loans generally must be used for specific purposes, such as paying for home repairs or property taxes.

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