 TITLE: Is a Reverse Mortgage Right for You? CONTENT: A reverse mortgage is self-explanatory in that it does the opposite of a traditional mortgage loan: Instead of borrowing money to buy a house, you can use the equity in your home to secure a loan. In other words, a reverse mortgage can be viewed as one or more advance payments on your home equity.\nThere are three types of reverse mortgages:\n*   **Single-purpose reverse mortgage**: Offered by some state and local government agencies, as well as some nonprofit organizations, these loans are designed for one purpose only—such as paying for property taxes or home improvements—which is specified by the lender. It is possible to qualify for a single-purpose reverse mortgage with low or moderate income.\n*   **Proprietary reverse mortgage**: Backed by the private lenders that offer them, proprietary reverse mortgages don't have the same limits as government-backed loans, so they may be better for homeowners who have a high property value and are looking for a bigger loan advance. These loans can typically be used for any purpose.\n*   **Home Equity Conversion Mortgage (HECM)**: The most common type of reverse mortgage, the HECM is insured by the Federal Housing Administration and can be used for any purpose. However, as of 2019, they are limited to $726,525 and have other requirements that may exclude some homeowners.\nA reverse mortgage is primarily designed for retirement-age people who are looking to access funds to cover living expenses but don't want to sell their home to get it.\nThe money you receive is generally considered tax-free, and you don't have to pay any of it back as long as you remain in the home and pay property taxes, homeowners insurance and overall maintenance of the home.\nWhen you ultimately sell the home, move out or you (and in some circumstances your spouse) die, the loan must be repaid, either by you, your spouse or your estate. If the loan comes due at you or your spouse's death, your heirs may need to sell the home to pay off what your estate owes.\nReverse mortgages typically come with several costs, including a mortgage insurance premium, origination fee, servicing fee and third-party fees. Also, interest will accrue over the life of the loan.\nWith HECMs, for instance, the initial mortgage premium is 2% of the loan amount, and you'll pay an ongoing 0.5% annually. The origination fee will be the greater of $2,500 or 2% of the first $200,000 of your home's value, plus 1% of the amount over $200,000—there's a maximum of $6,000 total. END