A reverse mortgage is a loan that allows homeowners 62 and over to convert a portion of their home equity into cash. This type of loan is especially appealing to people who want, or need, to supplement their retirement funds. With a reverse mortgage, you remain the owner of your home, so you must continue to pay your property taxes, homeowner’s insurance and home maintenance costs throughout the life of the loan; making a mortgage payment is not required on this loan.

A reverse mortgage works by using a portion of your home equity to first pay off any existing mortgage on the home. You are not required to make monthly payments on the reverse mortgage because the loan balance doesn’t come due until the final borrower no longer occupies the home as his or her primary residence, fails to pay taxes or insurance, or neglects to maintain the home.

While you are not required to make monthly payments, doing so could reduce your monthly interest and mortgage insurance or prevent it from accruing altogether. If you choose not to make a monthly payment on the loan, interest and the prorated mortgage insurance for that month will get added to the total loan balance.

After paying off your existing mortgage, your reverse mortgage lender will pay you any remaining proceeds from your new loan. As the homeowner, you get to choose how you want to receive your funds in the form of the following: Lump Sum, Line of Credit, Tenure Payments (equal monthly installments), or a combination of these.

• Delay social security and pension payouts

• Postpone drawing down retirement assets, giving assets time to grow

• Increase cash flow by eliminating monthly mortgage payments

• Access to a low cost growing line of credit

• Protect your portfolio performance in a down market

• Receive annuity style payments using your home’s equity

• Replace liquid assets

• You must be 62 years or older*

•You must have enough equity in your home – generally, at least 55%

• Not be delinquent on any federal debt

• Have financial resources to continue to make timely payments of ongoing property charges such as property taxes, insurance and homeowner association fees. You can use the money from the home equity accessed via the reverse mortgage.

• Along with these requirements, your home also needs to qualify for the loan. Here are a few basic requirements:

• The home must be your primary residence

• The home must meet FHA standards

• The home can be a manufactured or mobile home affixed to the foundation

• If the home is a condominium, HUD/FHA requires it to be approved, which may happen through the loan process

• Only one spouse must be 62 or older, and the other spouse will be entitled to the same protections as the original borrower

• The premium amounts for both the initial and the annual FHA Mortgage Insurance have been substantially reduced

• In fact, all fees associated with the HECM Reverse Mortgage program have been substantially reduced, making a great program even better

• Applicants who did not previously qualify for the HECM Adjustable Rate Mortgage loan program may now qualify for it or for the new fixed rate HECM loan program