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A Reverse Mortgage is the opposite (reverse) of a regular mortgage.

• With a regular mortgage, you borrow a sum of money. The amount of the debt decreases as you pay back the loan in installments according to an agreed schedule. The loan is secured by property: if you do not repay the loan as agreed, the lender can sell the property to recover the amount of the debt.
• On the other hand, a reverse mortgage is a way to receive money from your home without making monthly payments or selling it.  With a reverse mortgage, you receive an income, a sum of money, and/or a line of credit.  As a general matter, a loan under a reverse mortgage does not have to be repaid until you move out for more than a year, the house is sold, or the last borrower dies. At the death of the last borrower, the heirs can pay off the loan and keep the house or sell it to pay off the debt.

Reverse mortgages are only for people who are age 62 or over who own a home. From the lender's point of view, your health condition is not relevant with respect to obtaining a reverse mortgage or how you receive the cash. 

Because of the high costs involved, from an economic point of view, a reverse mortgage may not be a good economic choice for a person with a short life expectancy. However, if a reverse mortgage allows you to stay in your house, it's up to you whether quality of life trumps economics.

A reverse mortgage is particularly good for a person who has few assets other than a home.

Like regular mortgages, reverse mortgages come with either a fixed-rate or an adjustable-rate.

Several loan programs are available, one of which is from HUD (US Department of Housing and Urban Development.) The program is known as Home Equity Conversion Mortgage (HECM). Fannie Mae Home Keeper Mortgages are available through banks and mortgage companies.

The federal government requires borrowers to attend a counseling session before entering into a Reverse Mortgage.

NOTE:

• If your children are in the right financial position, consider a private reverse mortgage - a transaction in which a family member replaces the bank. The child can agree to give you a montly check and pay for any major home repairs. You agree to repay the loan plus interest and any money spent on maintenance. If the loan is not paid before, it is payable on death. There will be less up-front costs and fewer ongoing costs. Interest can be lower than what a bank would charge, subject to an IRS.minimum.  Do not attempt to create this type of transaction without the advice of a lawyer or an accountant. If you don't have one, learn how to choose a lawyer or an accountant. See the documents in "To Learn More."
• For additional ideas about dealing with a financial crunch, click here. For instance, one alternative if you have life insurance, is accesssing money from a policy now, while you are still alive. For additional information, click here.

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