Reverse mortgages are ideal for homeowners who are retired or no longer working and need to supplement their income. Interest rates can be fixed or adjustable and the money is nontaxable and does not interfere with Social Security or Medicare benefits. Your lender cannot take property away if you outlive your loan nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value.

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What advice should I get before taking a reverse mortgage?

Q. I understand that I must meet with an unbiased counselor before completing my reverse mortgage application. What does that accomplish?
A. This is a federally mandated feature of the reverse mortgage process and is designed for your protection. The counselor, who is from an independent government-approved housing counseling agency, explains in detail the pro's and con's of all your reverse mortgage alternatives. He or she will discuss a reverse mortgage’s costs and financial implications, should tell you about any government or nonprofit programs for which you may qualify, and advise you on any proprietary reverse mortgages that may be available in your area.

How much money can I get?

Q. How do you determine the amount of cash I am eligible for?
A. The amount you can borrow depends on several factors, including your age, the type of reverse mortgage you select, current interest rates, the location of your home, and the appraised value of your home and FHA's lending limits for your area. In most cases, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.

What are the advantages of a reverse mortgage?

Q. What are the advantages of a reverse mortgage?
A. There are many. Here are a few of the most significant:

• Remain independent. A reverse mortgage allows you to remain in your home and retain home ownership.
• Stay in your home. It allows you to remain in your home and retain home ownership.
• No monthly mortgage payments. You need not pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home.
• Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free* and will not affect your Social Security or Medicare benefits.
• Freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.

When must a reverse mortgage loan be repayed?

Q. When will I have to pay the principal and interests cost of this loan?
A. Your reverse mortgage loan becomes due and must be paid in full when one or more of the following conditions occurs: (a) the last surviving borrower passes away or sells the home; (b) all borrowers permanently move out of the home; (c) the last surviving borrower fails to live in the home for 12 consecutive months due to physical or mental illness; (d) you fail to pay property taxes or insurance; (e) you let the property deteriorate, beyond what is considered reasonable wear and tear, and do not correct the problems.

Q. If I take on a reverse mortgage, how will it affect my government benefits?
A. The funds from a reverse mortgage do not affect regular Social Security or Medicare benefits. You should discuss the impact of a reverse mortgage on federal, state or local assistance programs with a professional advisor, such as your local Area Agency on Aging (toll free at 1-800-677-1116), an independent reverse mortgage consultant, or a tax attorney.

Three types of reverse mortgages:

Fannie Mae offers three reverse mortgages to help homeowners 62 and older convert their home equity into cash and remain in their homes for life. Fannie Mae offers its conventional reverse mortgage loan, The Home Keeper Mortgage®, Home Keeper for Home Purchase, and the Home Equity Conversion Mortgage, an FHA-insured reverse mortgage.

The Home Keeper Mortgage is Fannie Mae's adjustable-rate conventional reverse mortgage. The amount available is based on three factors: the number of borrowers, the ages of the borrowers, and the adjusted property value. Anyone 62 years or older who either owns his or her home free and clear, has very low mortgage debt, and occupies the property as his or her principal residence is eligible for a Home Keeper.

Home Keeper for Home Purchase is a variation of this reverse mortgage product that gives homebuyers 62 and older additional flexibility not available through standard first mortgage financing. This product allows borrowers to purchase a new home without using all of their personal resources to fund the purchase, and they will have no monthly mortgage payments.

HUD's Home Equity Conversion Mortgage (HECM) is another viable option for homeowners 62 and older to tap the equity in their homes, while giving them other options to address their particular housing needs. The maximum mortgage amount insured by FHA is based upon local FHA loan limits.