Lowdown: What You Need to Know About Reverse Mortgages

Retirees who are strapped for cash can now tap into their home's equity for less.

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.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-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.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance