REVERSE MORTGAGES

Home Equity Conversion Mortgage (HECM), account for an estimated 90 percent of all reverse mortgages. In the 12 months ending in September, only 18,097 HECM loans were originated. Still that represented a 39 percent increase from a year ealier, and I susspect the number will skyrocket in the decades ahead.

Money received from a reverse mortgage is tax-free. How much can you get? If you are older, if interest rates are low or if your house is appraised at a high value, you can typically get a larger loan. The loan size, however, also depends on the product you choose. Five types of reverse mortgage are offered.

The two types of HECM loans, which differ in the way they calculate their interest rate, are both federally insured. The insurance protects the lender against loss should the reverse-mortgage balance be greater than the home's value when the homeowner dies or permanently moves out.

Thanks to this insurance, HECM loans have the steepest upfront costs. But the interest rate is relatively low, and you can typically borrow a larger percentage of your home's value.

To get a handle on costs, try the reverse-mortgage calculator.

With an HECM loan, you can take the cash as a lump sum, a line of credit or monthly income, or some combination thereof.

Closing costs are lower on the three other types of reverse mortgage, Fannie Mae's Home Keeper and Financial Freedom's two Cash Accounts products. The reason: No insurance is involved.  But because these loans aren't federally insured, you probably won't be able to borrow as much of your home's value.

Home Equity Conversion Mortgage (HECM

HECH Resources

Department of Housing and Urban Development (HUD)

Fannie Mae Home Keeper & Home Keeper for Home Purchase

AARP

National Reverse Mortgage Lenders Association (NRMLA).

NRMLA is a nonprofit trade association, based in Washington, DC, whose mission is to support the continued evolution of reverse mortgages as an important financial option for senior homeowners while educating both its members and consumers about the varied applications of this unique loan. Members sign a Code of Conduct pledging to abide by guidelines that assure fair, ethical, and respectful practices in offering and making reverse mortgages to seniors.

To educate consumers about reverse mortgages, NRMLA has created a booklet entitled Just the FAQs: Answers to Common Questions About Reverse Mortgages. This free booklet answers frequently asked questions, provides detailed information on the loan origination process, and includes a Code of Conduct for lenders, so that consumers can know their rights when working with a lender. The booklet may be obtained from AppraiserPlus or by calling NRMLA at 1-866-264-4466 (toll-free) or 202-939-1792.

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