Eligibility Guidelines

• The Federal Housing Administration requires that homeowners must be at least 62 before taking out a reverse mortgage. The home must be their principal residence, and the equity they have in their home must be worth at least half of the market value. Mobile homes are usually not eligible for reverse mortgages. There are no income or credit restrictions--it's based solely on the equity people have in their homes and their age.
  
  

Payments

• People taking out a reverse mortgage can elect to receive payments monthly or in one lump sum. They can also take out the loan as a line of credit, drawing on it as needed. The payments that people receive are deducted from the equity they have in their home, meaning they get that much less when the home is sold. People taking out reverse mortgages can never owe more than the home's value because of the FHA insurance they pay for that covers the difference.
  
  

Loan Amounts

• People can receive between 50 percent and 78 percent of the value of their home through a reverse mortgage, depending on their age and current interest rates (older people are generally eligible for more money). Therefore someone who has at least 50 percent equity in a home worth $400,000 can qualify for a $200,000 reverse mortgage loan. The more valuable the home, the higher the amount that can be borrowed through a reverse mortgage.
  
  

Repayment

• The loan doesn't have to be repaid as long as at least one borrower still lives in the home and is current on property taxes and home insurance payments. Owners also must keep the home maintained. The loan is repaid when the house is no longer the borrower's primary residence. The loan is paid off from the proceeds of the sale of the home or, in the event of death, the estate can convert the reverse mortgage into a traditional mortgage or pay it off.
  
  

Fees and Taxes

• People taking out a reverse mortgage pay a variety of fees for a home appraisal, application and the loan closing. There are also insurance and debt servicing fees. Typically the fees are added to the loan balance. Reverse mortgages are more expensive at first and less costly as time goes on. The IRS does not treat reverse mortgage payments as income, so there are typically no tax ramifications.