Common Questions about Reverse Mortgages
Excerpts from the National Reverse Mortgage Lenders Association (NRMLA)

What are my payment options?

You decide how to receive the money generated by a reverse mortgage. Your payment options are:

• An upfront lump sum payment.
• Line of credit
• Fixed monthly payments.
• A combination of monthly income and line of credit.

How much does a reverse mortgage cost? What are the upfront and closing fees?

Many of the same costs associated with a regular mortgage apply to reverse mortgages. You will be charged an origination fee, a mortgage insurance premium, an appraisal fee, and certain other standard closing costs. In most cases these fees and costs are capped and may be financed as part of the reverse mortgage, so that you incur little out of pocket expense.

Do I need to get an appraisal of my home to get a reverse mortgage?

Yes. Since the value of your home is a factor in determines how much money you can get from a reverse mortgage, an appraisal is required. Normally the lender will order the appraisal, which is paid for by the borrower at the time of application.

Do I need a lawyer to apply for a reverse mortgage?

Legal counsel is not required. However, NRMLA encourages you to seek the advice of a legal, tax, or financial advisor before committing to a reverse mortgage.

Are reverse mortgage proceeds taxable income, and can they affect my Social Security or government benefits?

Funds from a reverse mortgage are tax free; it's your money, not additional income. A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you receive a lump sum payment from a reverse mortgage, any amount retained the month after you get it would count as a resource and could affect Medicaid eligibility. To be safe, consult a reverse mortgage lender, or a Medicaid expert.

 Who owns title to my home while my reverse mortgage is outstanding, the bank or me?

You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage.

Am I required to pay anything during the course of the reverse mortgage loan?

No. The flow of payments is reversed during the term of the reverse mortgage, the lender pays you. However, you are responsible for keeping up payments on your homeowners insurance and property taxes, and to maintain the condition of your home.

Are there any limits on how I can use the funds from a reverse mortgage?

No. Borrowers have used reverse mortgages for a variety of purposes, such as paying health care expenses, supplementing retirement income, financing home repairs or modifications, or visiting friends and family. Some have used a reverse mortgage to purchase recreational vehicles, start a small business, and travel. Others have used reverse mortgages to eliminate expenses by paying off mortgages and credit card debt. The only limit on how you use a reverse mortgage is your imagination.

What happens when my house gets passed to my heirs?

Once your home is passed to your heirs, the reverse mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sales proceeds.