Homeowners who are retired or are considering retirement may wish to increase their monthly income. Seniors who live on a fixed income may be concerned that their retirement savings and Social Security income may not be enough to keep up with the rate of inflation. Catastrophes and other unexpected events create unexpected expenses.

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• The U.S. Department of Housing and Urban Development, or HUD, established reverse mortgages to help seniors who are homeowners pay for their living expenses and rising medical costs.
• To qualify for a HUD reverse mortgage you must be at least 62 and either own your home outright or have only a small balance left on your current mortgage.
• A reverse mortgage allows qualified homeowners to borrow money against their home's equity.
• Qualified homeowners can take out a reverse mortgage to get a lump sum of money, receive a monthly income or access money, similar to a line of credit.

There are several different types of reverse mortgages. To find out what best suits your needs, learn more about types of reverse mortgages and reverse mortgage qualifications.

A reverse mortgage may be the solution to financial difficulties if you are a senior citizen and you owe nothing, or close to nothing, on your home. You can use the equity in your home to borrow money from a lender and you don't have to make any payments until the home is sold.

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As long as a borrower lives in his or her home, HUD does not require repayment of the money borrowed through a reverse mortgage. If the homeowner sells the home or is deceased, the lender will recover the loan and the interest at the time the home is sold. Any additional value acquired from the sale of the home would be passed onto the surviving legal recipients. If you take out a reverse mortgage, HUD requires you to have mortgage insurance. If proceeds from the sale of the home are less than what the homeowner owes for the reverse mortgage loan, then HUD will pay the remaining balance of the loan, which is covered by the mortgage insurance.

There is no minimum income or amount of assets required to qualify for a reverse mortgage. As long as you own a home and are of qualifying age, you can receive a HUD reverse mortgage. If you owe money on your home mortgage, you must pay off this debt with money from the reverse mortgage. A reverse mortgage must be the first and primary lien on the property. Like a traditional mortgage, there are closing costs and financing fees associated with a reverse mortgage. You may finance these costs into the mortgage loan.

Reverse mortgage lenders may require repayment if you do not pay your property taxes, keep the home in good repair, have homeowner's insurance on the property or if you rent out part of your home, add a new owner to the title of the property, the zoning of your home changes or you take out any new debt in which the home serves as collateral. Also, the mortgage lender may consider you in default if you abandon your home, declare bankruptcy, the home is condemned or the government acquires your home for public use. You can learn more about reverse mortgages from AARP.

The Department of Housing and Urban Development is another good source of information. HUD can provide you with the information necessary to determine if a reverse mortgage is right for you.

Before you decide to take out a reverse mortgage, you should know about the different types of reverse mortgages offered:

• The majority of reverse mortgages are Home Equity Conversion Mortgages. This type of loan is guaranteed by HUD and the Federal Housing authority, and may include a line of credit, which can appreciate, various payment options and a maximum loan limit that varies by location.
• The Homekeeper reverse mortgage from Fannie Mae also includes a maximum lending limit, but does not offer growing credit limits. This reverse mortgage is guaranteed by Fannie Mae, and often comes with lower closing costs than HUD reverse mortgages.
• The Private Cash account reverse mortgage is usually reserved for homes worth more than $500,000. This type of reverse mortgage offers a growing credit line, flexible payment options and often comes with higher closing costs.

Contact a financial advisor before you decide to take out a reverse mortgage. You can learn more at ReverseMortgage.org