Dr. Frances Graham, housing specialist with the Mississippi State University Extension Service, said the program is one way to meet expenses and maintain financial independence for the rest of life. Money from a reverse mortgage can be used for any purpose, such as living expenses, home improvements and health care. Rather than making a payment to your lender each month, the lender pays you. Since it is a rising debt loan, the interest is added to the principal loan balance each month rather than paid on a current basis. The total amount of interest you owe accumulates significantly with time.
Reverse mortgages are different from home equity loans or lines of credit which require repayment.
Depending on the plan, reverse mortgages become due with interest either when the owner permanently moves, sells the home, dies or reaches the end of a preselected loan term. The debt is usually repaid by refinancing the loan into a forward mortgage or by using the proceeds from the sale of the home. Some reverse mortgage interest rates are fixed, others variable, and some plans charge origination fees, closing costs and servicing charges. Insured plans are available for a fee. To qualify for a reverse mortgage, all applicants must be age 62 or older, and own their home or have a very low mortgage balance.