You are basically selling your house to a financial institution to get access to your equity and the sale is delayed until you leave the house. There are two main types of reverse mortgages (HECM & Proprietary). We will cover the HECM reverse mortgages, which are sold by individual financial institutions and under HUD government guidelines.

Who is eligible?

• Need to be 62 and have equity in a house, condo and possibly a mobile home 
• Biggest factors are the age(s) of the homeowners and the value of the house minus the equity.

Specifics:

• Up to $620,000 can be part of the reverse mortgage and anything higher will remain with the current owner and is considered equity in the house. 
• The financial institution does not take ownership of the house until you die or move.
• Depending upon the situation and the bank, the home owner can get
• A monthly annuity payment 
• Single disbursement lump sun
• Credit line or combination of these three

Fees

• Upfront fees are usually up to 2.5% and approximately 1.25% on an annual basis.

Action Step: There are some costs and fees involved in a reverse mortgage transaction and it can be wise to have a real estate lawyer or financial planner (or both) review the details.

Golden Nugget: Home Repair Loans – Most people do not realize that there are some home loans that are available to low and middle income seniors that are very reasonable. These loans are govt. backed and run through banks / financial institutions and are usually between $5,000 and $25,000. You have nothing to lose to ask your bank what are your options.