1. Age matters (income doesn't). If you are 62 or older and have paid off your mortgage (or owe only a small balance), you may be able to tap your home equity to generate extra cash. You can take the money as a lump sum, a line of credit, monthly payments, or a combination of a credit line and regular payouts. Unlike a traditional mortgage or home-equity loan, you don't need to meet income or credit requirements to qualify, and you don't have to repay the loan as long as you live in the house.
2. Lenders are motivated. Declining property values and stricter lending limits imposed by the Federal Housing Administration last year took a big bite out of the reverse-mortgage market. Now lenders are looking to gin up new business -- partly to satisfy investor demand for government-backed mortgage securities, known as Ginnie Maes, which include reverse mortgages. To attract new borrowers, some lenders are waiving loan-origination fees and other upfront charges, which could save you up to $10,000 -- and increase the amount you can borrow by the same amount.
3. It could be a stop-gap solution. Because upfront costs are lower, you may not need to remain in your home for several years to justify the cost of the loan. Say you want to sell your house, but the real estate market stinks and you need to fix it up to attract potential buyers. You could take out a reverse mortgage to finance the home improvements. You'd then pay off the reverse mortgage when you sell the house and pocket the difference. (The loan is due in full when you move out permanently -- or die.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
4. The older you are, the better. The amount you may borrow depends on your age, your home's value and interest rates. The older you are -- and the more valuable your home (up to a maximum of $625,500) -- the more you are entitled to take. The loan calculation factors in the interest and fees that accrue over time, reducing the amount of equity you can tap. For example, if you're 65, you might be able to borrow up to half of your equity. Wait until age 85, and you could tap 70% or more.
5. Borrow sparingly. If you choose a lump sum, you must borrow the full amount that you qualify for -- close to $200,000 in the case of, say, a 65-year-old homeowner with a paid-off home worth $400,000. Interest will continue to build on the entire amount until the loan is paid off. If you don't need the full amount, select a line of credit or monthly payouts and pay interest only on the amount you use.
6. The loans still aren't cheap. If you borrow $50,000 on a $400,000 home as a line of credit, you would owe more than $16,000 in interest and mandatory insurance premiums after two years. That combined cost would double to more than $32,000 if you remained in the house five years. Use the calculator at www.goldengateway.com to estimate how much you can borrow and what it will cost.
7. Costs could be going up. Fees and interest rates are low now. But the FHA could tighten lending limits and boost insurance fees if its budget for the reverse-mortgage program is scaled back in the fiscal year that begins October 1.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
457 Plan Contribution Limits for 2026Retirement plans There are higher 457 plan contribution limits in 2026. That's good news for state and local government employees.
-
Medicare Basics: 12 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2026SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $70,000 in 2025, and up to $72,000 in 2026.
-
Roth IRA Contribution Limits for 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
-
SIMPLE IRA Contribution Limits for 2026simple IRA For 2026, the SIMPLE IRA contribution limit rises to $17,000, with a $4,000 catch-up for those 50 and over, totaling $21,000.
-
457 Contribution Limits for 2024retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
