You can choose from three kinds of reverse mortgages. If you're a senior American who is "house-rich, cash-poor" -- in other words, if you own your home but you have very little income -- reverse mortgages may be a good option for you. They allow you to translate the equity of your home into cash, tax-free. This is particularly helpful if you're a senior struggling to pay for medical costs and for whom Social Security benefits are simply not covering your living expenses. When you take out a reverse mortgage, you don't have to repay the loan during the course of your life unless you sell your home.
To qualify for a reverse mortgage, you usually have to be 62 or older, own your home outright (or be paying off a very low mortgage), and using that home as your principal residence.
Another type of reverse mortgage is known as the proprietary reverse mortgage, which is easier to qualify for but tougher on your wallet. These mortgages have high initial costs, including appraisals, credit reports and closing costs. They also tend to have monthly service fees. Private companies own these loans and use lenders to monitor the mortgages for them.
Lastly, there is the most popular kind of reverse mortgage [source: Munnell], known as the home equity conversion mortgage (HECM). This is the only type of mortgage guaranteed by the government and insured by the Federal Housing Administration.