Potential

• A reverse mortgage differs from a traditional mortgage in that in a traditional mortgage, you take out the home loan, then make payments to reduce the debt. In a reverse mortgage, you draw money against your equity and no payments are made, so equity is reduced while debt increases.
  
  

Advantages

• With a reverse mortgage, the homeowner is allowed to continue living in his home, making no payments until he sells the home or dies. Therefore, the homeowner will have use of her equity for as long as she has equity in the home.
  
  

Types

• You may take the amount of money available to you in a lump sum, monthly over a set period of years, or as a line of credit to draw against. You can also take the money in a combination of these methods.
  
  

Costs

• Most reverse mortgages require an application fee. Included in this will be an origination fee, credit check and appraisal. Most reverse mortgages also require a monthly service fee which varies by institution. Interest is also added. Most of these fees can be added to the amount of loan, so there is no out-of-pocket cost to the homeowner.
  
  

Warning

• Remember, you still own the home, and taxes and insurance must be paid. With a reverse mortgage, you are using up your home equity and so that money might not be available in a time of need.