Basic Loan Features

Homeownership

• You remain the owner of your home
• You pay your property taxes
• You pay home-owners insurance
• You make 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 repayment.

Financing Fees

• Use the money from a reverse mortgage to pay various loan fees. This is called 'financing' the loan costs. The costs are added to your loan balance, and you pay them back plus interest when the loan is over.

Loan Amounts

• Depends on the specific reverse mortgage plan or program you select.
• Depends on current interest rates
• Depends on closing costs
• Depends on the kind of cash advances you choose.
• Depends on the amount of equity you have in the house.
• Depends on your age
  (The older you are, the more cash you can get.)
  (The more your home is worth, the more cash you can get.)

Debt Payoff

• Reverse mortgages must be 'in first position.' They must be the primary debt against your home. So if you now owe any money on your property, you
  generally must either a) pay off the old debt before you get a reverse mortgage; or b) pay off the old debt with the money you get from a reverse mortgage.
• Most reverse mortgage borrowers pay off any home debt with a lump sum
  advance from their reverse mortgage. (You may not have to pay off other debt against your home if the prior lender agrees to be repaid after the reverse mortgage is repaid.)

Debt Limit

• The debt you owe on a reverse mortgage equals all the loan advances you receive (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 the amount is less than your home is worth, you (or your estate) keep whatever amount is left over.
• If the rising loan balance grows to equal the value of your home, then your total debt is limited by the value of your home. (You can never owe more than what your home is worth at the time the loan is repaid - ''non-recourse limit.'')

Repayment

• All reverse mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home.
• A ''permanent move'' means that neither you nor any other co-borrower has lived in your home for one continuous year.
• Repayment required if you fail to pay your property taxes.
• Repayment required if you fail to maintain and repair your home.
• Repayment required if you fail to keep your home insured.
• Lenders generally have the option to pay for these expenses by reducing your loan advances and using the difference to pay these obligations.
• Repayment required if you declare of bankruptcy.
• Repayment required if you abandon your home.
• Repayment required if you perpetrate fraud or misrepresentation.
• Changes that could affect the security of the loan for the lender can also make reverse mortgages payable. For example, renting out part or all of your home, adding a new owner to your home's title, changing your home's zoning classification; or taking out new debt against your home.

Read the loan documents carefully to make certain you understand all the conditions that can cause your loan to become due.

Cancellation

• After closing, you have three days to reconsider your decision.
• If you decide to cancel, you must do it in writing, using the form provided by the lender, or by letter, fax, or telegram. It must be hand delivered, mailed, faxed, or filed with a telegraph company before midnight of the third business day. You cannot cancel by telephone or in person. It must be written.

Source: AARP
http://www.aarp.org/revmort/

Borrower Requirements:

• Age 62 years of age or older
• Own your property
• Occupy your property as primary residence
• Participation in a consumer information session given by an approved HECM
  counselor

Mortgage Amount Based On:

• Age of the youngest borrower
• Current interest rate
• Lesser of appraised value or the FHA insurance limit

Financial Requirements:

• No income or credit qualifications are required of the borrower
• No repayment as long as the property is the primary residence
• Closing costs may be financed in the mortgage

Property Requirements:

• 1 family home or 1-4 unit home with one unit occupied by the borrower
• Condominiums or Planned Unit Developments (PUD) must be HUD-FHA approved
• Cooperatives that meet HUD guidelines
• Mobile Homes that meet HUD guidelines
• Meets minimum property standards (borrower may fund repairs in the mortgage)

Homeowners 62 and older who have paid off their mortgages or have only small
mortgage balances remaining, and are currently living in the home are eligible to
participate in HUD's reverse mortgage program. The program allows homeowners to borrow against the equity in their homes.

Types of payment plans:

• Tenure - equal monthly payments as long as at least one borrower lives and
  continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or in installments, at times and in amount of borrower's choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit with monthly payments for as
  long as the borrower remains in the home.
• Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Homeowners whose circumstances change can restructure their payment options for a nominal fee of $20.