I know I am confused on this topic since I haven't seen it before or known of anyone who has used it so I thought I would blog about what I have found out.   Reverse mortgages are quite different from any other loans and the risks to borrowers are unique just as this loan is unique.  Before considering one, you need to do your homework carefully and thoroughly.   I have found a site link for you to take a look...please take a look at:  http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm

Who's Eligible??  All owners of the home must apply for the reverse mortgage and sign the loan papers. All the borrowers must be at least 62 years of age for most reverse mortgages. The home generally must be their principal residence.  Single family one-unit homes are eligible for all reverse mortgages. Some programs also accept 2-4 unit owner-occupied homes, along with some condominiums, planned unit developments, and manufactured homes. Mobile homes are generally not eligible.

This first thing I have found out is that these loans are expensive...they grow in the amount of money you owe the lender so if and when you sell your home, you might owe the lender more money for your house to get it free and clear than what it was worth when you took out the loan...scary thought to me.   Also, the younger you are when you take out a reverse mortgage, the more the compound interest will grow, and the more you will owe. On the other hand, due to high up-front costs, these loans can be especially costly if you sell and move just a few years after taking one out.  A couple of good questions are why are you interested in this type of loan? What will you spend the money on once you get it? Thinking that a dream vacation of a lifetime should be paid for by a reverse mortgage is a very expensive way to pay for it. Investing the money in the stock market or any other type of investment from this loan is also an especially bad idea, because the loan is highly likely to cost more than you could safely earn. If what the lender is proposing sounds too good to be true, that's usually a good sign that you should run the other way...quickly!

What other options are there for you?  Do you have other financial resources that you could use instead of taking out a reverse loan? If you don't, go and speak with your banker to see if they will lend you some money on a home equity loan or home equity line of credit as these options are less expensive than the reverse mortgage.  Also, talk with a Realtor to look into the costs and benefits of moving into a less expensive home, and taking the equity from the first home and either pocketing it or spending it on whatever you need to. 

With a reverse mortgage, you remain the owner of your home just like when you had a regular mortgage. You are still responsible for paying your property taxes and home-owner insurance and for making property repairs. When the loan is over, you or your heirs must repay all of your cash advances plus interest. Reputable lenders don't want your house; they want their money back.

The debt you or your heirs owes on a reverse mortgage equals all the loan advances you received (including any you used to finance the loan or to pay off prior debt), plus all the interest that is added to your loan balance. If that amount is less than your home is worth when you pay back the loan, then you (or your estate) keep whatever amount is left over.

But if your rising loan balance ever grows to be equal to the value of your home, then your total debt is generally limited by the value of your home in today's market. Put another way, you generally cannot owe more than what your home is worth at the time the loan is repaid.

The technical term for this cap on your debt is a "non-recourse limit." It means that the lender, when seeking repayment of your loan, generally does not have legal option to anything other than your home's value and cannot seek repayment from you or your heirs. An important exception to this limit on federally-insured reverse mortgages is discussed on the Eligibility and Repayment from AARP about these types of loans.

How much money will I get?? Within each loan program, the amounts you can get generally depend on your age and your home's value:
•         the older you are, the more cash you can get; and
•         the more your home is worth, the more cash you can get.

The specific dollar amount available to you will also depend on interest rates and the cost of closing the loan in your area. All reverse mortgages are due and payable when the last surviving borrower dies, or you sell the home, or permanently move out of the home. Just like a regular mortgage, reverse mortgage lenders can also require repayment at any time if they find that you have failed to pay your property taxes or special assessment, failed to maintain and repair the home or if you have failed to carry insurance on the home.

So there you have it in a nutshell, these loans can be good and bad...depending on what you need the money for and what your circumstances are.   Be sure to talk to at least two lenders about what products they can offer you before you go with the first one you talk to, and if you don't know any lenders, speak with a Realtor in your area for names of lenders they have used.  To find out what your home's value is, please go to:  http://www.summitcountyrealestate.info/ for more information.