Reverse Mortgages

• A reverse mortgage is part of the Federal Housing Administration (FHA) home equity conversion mortgage (HECM) program. With a reverse mortgage, you can use the equity in your home to receive a single lump sum payment or a series of scheduled payments. In most cases, no repayment is required under a reverse mortgage unless you sell the house or move from the house.
  
  

Reverse Mortgage Eligibility

• Reverse mortgages don't use traditional home loan qualification criteria. Instead, qualification for these loans is based on your age and the equity you have available in your home. Eligible homes include traditional one- to four-family homes, HUD-approved condominiums and FHA-approved manufactured homes. The minimum age requirement for a reverse mortgage is 62 years of age. In addition, your home must either have no mortgage or a mortgage balance that is payable at closing with proceeds from the reverse mortgage.
  
  

Second Mortgages

• A second mortgage is a traditional mortgage loan or home equity line of credit that has second lien position in the event of a borrower default. Interest rates on second mortgages are normally higher than interest rates available on first mortgages. Unlike a reverse mortgage, borrowers normally must qualify for second mortgages based on income, employment, credit history and equity available in the house. Also, regular monthly payments are required with a second mortgage.
  
  

HELOC

• A HELOC is a type of second mortgage that is also a revolving line of credit. With a HELOC loan, the borrower typically receives a credit limit based on the available equity in the home. Funds are drawn from the HELOC as needed. The advantage of a HELOC over a traditional second mortgage is that you only pay interest on the funds as you use the line of credit. Also, as you pay back a HELOC loan, you can continue to draw the funds up to your credit limit.