To get a reverse mortgage, you must be at least 62 years old and have paid off most or all of your home loan. Most of the time, income doesn't matter, and neither medical tests nor medical histories are needed. If you want a HECM, you must also get free mortgage counselling from a "housing agency" that has been approved by the government. Some banks that offer proprietary reverse mortgages may require the same kind of counselling or education for the homeowner.
How much you can borrow depends on how old you are, how much equity you have in your home, how much your home is worth, and how much the interest rate is. If it's a HECM, the most that can be paid out is set by federal law. You can be paid in a lump sum, in monthly instalments, through a line of credit, or a combination of all three.
What's the same?
Reverse mortgages are especially appealing to older people because the loan advances are not taxed and usually don't affect Social Security or Medicare benefits. Depending on the plan, homeowners with reverse mortgages can usually keep the title to their homes until they move permanently, sell their home, die, or reach the end of a loan term they chose ahead of time. Most of the time, a move is permanent when the owner hasn't lived in the home for 12 months in a row. So, for example, a person could spend up to 12 months in a nursing home or other medical facility before the reverse mortgage was due.
But keep in mind that:
Because they are loans with rising debt, reverse mortgages tend to be more expensive than other types of loans. Each month, the interest is added to the balance of the loan. Since interest builds up over time, the total amount of interest owed goes up by a lot.
Reverse mortgages can use all or part of a home's equity. This means that the homeowner and his or her heirs will have less money.
Lenders usually charge origination fees and closing costs, and some also charge servicing fees. The lender decides how much.
You can't write off the interest on a reverse mortgage until the loan is paid off in full or in part.
If a homeowner keeps the title to their home, they are still responsible for taxes, insurance, fuel, repairs, and other costs related to housing.