Are some senior property owners ineligible?

Yes. Those who own cooperatives, or whose property is raw land, farms or manufactured homes built prior to 1976, are ineligible. Reverse mortgages also aren't written on time shares or property used solely for rental.

Why does this type of mortgage exist?

Congress promoted the idea of helping seniors supplement Social Security income by tapping what is often their largest asset, their home. Widows in their 70s make up half of all those who hold reverse mortgages.

If I take out a reverse mortgage, who owns my home?

As with any other mortgage, you do.

What are the common reasons seniors take out reverse mortgages?

Perhaps the most common is to provide a monthly income supplement. Reverse mortgages enable those who are "house rich" but cash poor to stay in their homes by providing extra income to pay for home repair, property taxes and insurance. Others use them to pay for health care, underwrite travel, repay debts or help out family members. There are no restrictions on how the money is spent.

When is a reverse mortgage not a wise move?

When you know you won't be staying in your home more than a few years. Then the fees involved may make the cash you get very expensive. One thing to know: the federal truth-in-lending law requires lenders to provide you with financial projections showing how much a reverse loan will actually cost you. This is figured as the Total Annual Loan Cost (TALC), and all lenders must figure it the same way, giving consumers a way to compare costs from different lenders.

How much money can I get?

In general, that's determined by your age, the appraised value of your home (minus any existing liens such as a mortgage balance), the county you live in and the cost of the loan. However, different lenders may be willing to lend you different amounts based on these same criteria, so it pays to shop around. In Western Washington, it's common for homeowners to get $50,000 to $75,000 in cash or $400-$600 in monthly income or a combination of the two. Homeowners in Eastern Washington qualify for about 70 percent of what those this side of the Cascades do. The reason: lower home values.

Once I have this loan can I adjust the amount of money I get?

Usually yes, for a small fee, but you have to stay below the upper limit the lender set.

How does a reverse mortgage pay out?

Depending on who's granting the loan, there are five basic ways you may choose from:

1. Tenure option: You receive equal monthly payments for life or as long as you live in your home. Under this plan it's actually possible to get more money than your home is worth.

2. Term option: You get equal monthly payments for the fixed amount of time you select, for example 10 years.

3. Line of credit option: This allows you to get all your money immediately as cash or in lesser amounts at times of your choosing.

4. Modified tenure option: You get a percentage as equal monthly payments for as long as you live or reside in the home, and save the rest to be used as a line of credit.

5. Modified term option: You get a percentage as equal monthly payments for a fixed period of time you select, and save the rest to be used as a line of credit.

There are additional variations to these plans. For example, the line of credit amount may increase over time with some programs, but not with others.

What is required of borrowers?

To get the FHA's Home Equity Conversion Mortgage, you must attend a free consumer counseling session. In the Seattle area, those sessions are run by Consumer Credit Counseling, the Urban League and the Fremont Public Association. Fannie Mae also requires counseling, but it can be lender provided. Private lenders don't require counseling, but most will provide it as a service.

Counseling is used to help you figure out if you qualify, how much money you can get, how much it will cost you and how it will affect your estate. Counselors also help seniors learn if there are other ways to get the financial aid they need such as tapping into state and local programs that reduce property taxes, utility bills, auto insurance or help provide low-cost home maintenance or repairs. Senior Information & Assistance also has free information about those programs. Senior I&A can be reached at 448-3110 or (800) 972-9990. The number for the hearing impaired is 448-5025.

What costs are involved in getting a reverse mortgage?

Many of the same ones a borrower faces when taking out a conventional mortgage. They must be explained in a good faith estimate and generally equal 3 percent to 4 percent of the maximum amount you request. Fees can include the costs of an appraisal, title insurance, loan origination, points, escrow and recording. Some programs also require mortgage insurance that will make up the difference if, at the end of the life of your loan, your home is worth less than the amount owed. Generally these fees are "rolled" into the loan amount; thus you pay no out-of-pocket money up front. In addition, all charge a monthly servicing fee.

What fees aren't required?

A "finder's" or "consultant's" fee for directing you toward a lender. Nor should you have to pay for counseling; that's free.

How does a reverse mortgage differ from a home equity loan?

When taking out a home equity loan, your income and credit are considered, and you begin repaying the loan as soon as you get it. None of this is true with a reverse mortgage. Another big difference: The interest rate on a reverse usually is lower.

What if either my spouse or I need to move to a nursing home and the other one wants to continue living in the house?

As long as one of you continues to live in your home, the reverse mortgage remains in effect.

What if I want to sell my home because I want to live elsewhere?

There are no restrictions against you selling your home; however, once you do, you must repay the loan.

How is a reverse mortgage paid back?

Generally the mortgage continues until you die or move out of your home. Then the home is sold and the total cost (payments to you, plus fees and interest) is repaid from the proceeds. Any money left over belongs to you or your estate. However, there's no requirement that your home be sold. If your heirs can pay off the reverse mortgage using another source (for example, your life insurance) they may keep the house. Homeowners can also end the loan at any time by paying the amount due in full. There is no penalty for early payoff.

How is the interest rate set and how does it compare to other types of mortgages?

On a conventional mortgage you have many options, including fixed rate, balloon and adjustable. Reverse mortgages, however, are adjustable, with the rate tied to various financial market indexes. Your initial rate on a reverse is set at closing; depending on the exact reverse you get, it can adjust either monthly or annually. The fact that the interest rate changes does not affect the amount of money you get each month (if you elected to take monthly payments), but it does affect the amount eventually owed.

Are these loans protected by the government?

There's only one that's federally insured by the government: the Home Equity Conversion Mortgage, administered by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). However, lenders consider Fannie Mae so solid that they say its Home Keeper reverse program might as well be considered as good as government protected.

Who underwrites reverse mortgages?

The government (as in FHA's Home Equity Conversion Mortgage), Fannie Mae and a number of private national lenders. The private national lenders whose programs are available in Washington, through local lenders, are Transamerica Corp. and Household Senior Services, a division of Household Bank. There are no programs run by the state or available only in Washington.

Do all mortgage lenders offer these reverse mortgages, and how do I find those who do?

No, very few do. The nonprofit National Center for Home Equity Conversion offers a list of lenders by state. To get it, send $1 and a stamped, self-addressed, long envelope to Reverse Mortgage Locator, Suite 115, 7373 147th St., Apple Valley, MN 55124.

The American Association of Retired Persons used to have a list, but is now referring people to the National Center for Home Equity Conversion. However, AARP does offer a free, 44-page booklet titled "Home-Made Money: A Consumer's Guide to Home Equity Conversion," stock number D12894. To receive a copy, write, mentioning the title and stock number, to AARP Fulfillment (EEO1134), 601 E St. N.W., Washington, D.C., 20049. Phone calls to Fannie Mae, (800) 7-FANNIE, and the FHA, (800) 569-4287, will get you free information about their programs.

If I don't qualify for one reverse mortgage might I qualify for another?

Yes.

Are there differences in reverse mortgages offered by different entities?

Yes, the fees charged, the amount of money you get and the way you get it may vary. There's no one plan that universally offers the most cash. Also, at the end of a reverse mortgage, there may be less equity left over in the home from one plan than from another.

Are some programs better for couples and others better for singles?

Yes. In figuring how much money you qualify for, some lenders recognize dual life expectancy while others recognize only the age of the youngest homeowner.

What if I have a lien on my home?

You're still eligible for a reverse mortgage, but you usually must pay off the existing debt, which you can do by getting at least part of your reverse mortgage as a cash payout.

How will a reverse mortgage affect my taxes or government benefits?

Because it's a loan, the amount you get either monthly or in a lump sum isn't considered income so you pay no taxes on it. Social Security and Medicare are not affected by it. However, Medicaid and Supplemental Security Income (SSI) may be.

Can I get a reverse if I'm a snowbird and live elsewhere every winter?

Yes. And if you own your winter home, and don't rent it out when you're not there, it's possible to have reverse mortgages on both your primary and vacation homes.

Are any reverse mortgages available to persons who are not yet 62, but are disabled or terminally ill?

There are none at this time.

Sources: This article was based on information provided by Fannie Mae, the U.S. Department of Housing and Urban Development, Seattle Mortgage, The Reverse Mortgage Company and Ken Scholen, director of the National Center for Home Equity Conversion and author of "Your New Retirement Nest Egg," a book that explains and compares the costs and payouts of various reverse mortgage programs.