How to Get a Reverse Mortgage

Reverse mortgages (also called home equity conversion loans) are ideal for home owners over 62 who are house-rich and cash-poor. Reverse mortgages are available in most states. The lender pays you money based on the equity you've accrued in your home; you receive a lump sum, a monthly payment or a line of credit. Here's what you need to do to get a reverse mortgage.

Difficulty:

Moderate

Instructions

Things You'll Need

• Online Mortgage/finance Services

1. Be at least 62 years of age, have a low or zero balance owing against your home, and maintain the property as your principal residence. (The home can be a single family residence, a one- to four-unit building, a manufactured home, a condo or a planned unit development.)

2. Contact Fannie Mae at [phone] for a free list of reverse mortgage lenders as well as information about its own reverse mortgage product. Or contact the Department of Housing and Urban Development at [phone] for information about its mortgage product.

3. Read the terms of reverse mortgages thoroughly.

4. Apply online, by mail or in person.

Tips & Warnings

• You can fund home repairs from your reverse mortgage.

• Interest rates on reverse mortgages can be fixed or adjustable.

• Your lender cannot take property away if you outlive your loan.

• You cannot be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value.

• Reverse mortgage advances are nontaxable and don't affect Social Security or Medicare benefits.

• The longer you, the home owner, live, the less expensive your reverse mortgage will be.

• Lenders will charge origination fees and closing costs. There may also be insurance premiums and loan servicing charges.

• Interest is added to the principal loan amount balance each month, so the total amount of interest you owe increases significantly with time, leaving less equity for your heirs.

• Responsibility for repairs, taxes and maintenance remains yours.

• When you sell your home or no longer use it as your primary residence, you or your estate will repay the cash you received from the reverse mortgage plus interest and other finance charges to the lender.