In a reverse mortgage, the loan is against the equity of your house and so income has no effect upon the terms. With each loan advance taken, the equity will decrease, although there is usually a nonrecourse clause to ensure that no more than the value of the home can be taken as repayment of the loan. This affords some protection to the borrower, at least.

All debts on the property must be paid off before you apply for a reverse mortgage. And, once the loan is granted, it will not become due while you live in the house, unless you sell the property or move away.

Ownership of the home remains yours and so you will still be responsible for payment of taxes, maintenance and insurance that may accrue. Any default on these obligations can cause the loan to become due and payable. Certain other circumstances can cause the loan to become payable immediately. These can include renting out all or part of your home, taking out another loan on the home, declaring bankruptcy or the house being condemned as unsafe.

Lenders do usually charge fees for origination of the loan and closing costs. There may also be servicing fees. Interest rates on the loan may be fixed or variable. It is important to understand all the fees associated with your loan.

Next: The three types of reverse mortgages