Types

• Home Equity Conversion Mortgages (HECM) are federally insured and make up the majority of these types of loans. Proprietary reverse mortgages are backed by financial institutions.
  
  

Features

• When all homeowners listed on the loan die, sell the home or permanently move out, the loan must be paid back plus interest. If death is involved, the homeowners' loved ones are responsible for payment.
  
  

Function

• Reverse mortgages were created to help alleviate economic hardship at a time when seniors are experiencing decreased income and increased health costs.
  
  

Benefits

• Since the loan does not have to be repaid while the borrower is living in the home, homeowners can use these funds to supplement their retirement income.
  
  

Warning

• A report from the National Consumer Law Center warns that subprime lenders are targeting seniors by advertising reverse mortgages as free money.
  
  

Considerations

• Seniors should tread carefully when considering a reverse mortgage. At the very least, they should look into HECMs, which offer some consumer protection.