Through a U.S. government insured program, originally created by AARP, a senior can obtain a loan for approximately 40%-75% of the appraised value of their home. The senior never has to repay the loan in their lifetime. Then, when the last surviving spouse dies, the money received (plus about 6% interest) is repaid by the estate, usually from the sale of the house.
Typically, seniors who do a reverse mortgage get $50,000 - $100,000 cash today and they always retain 100% ownership (and the future appreciation) in the home. Also note that there is no income or good credit requirements. A senior simply must be 62 or older and have equity in their home.
Already Have a Mortgage?
If you do, that's OK. You can still do a reverse mortgage. But with the proceeds, you must payoff the balance of your existing mortgage. By doing so, you then eliminate your monthly mortgage payment - thereby your monthly income goes up by that amount.
Use of Proceeds
The proceeds from a reverse mortgage can be used for anything: daily living expenses, home repairs and home improvements, medical bills and prescription, paying of existing debts, education, travel, long-term health care, etc. Many people use reverse mortgages as a way to give their kids a portion of their inheritance now, so they can see those happy faces while they are still alive. Many seniors feel comfortable doing this since there are no monthly mortgage payments associated with a reverse mortgage.
The proceeds from a reverse mortgage are available as a lump sum, fixed monthly payments for as long as you live in the property, or a combination of both options.
Amount You Can Receive
It ranges between 40%-75% of the appraised value of your home. The older you are , the more you get. If you are 62-65, you will get about 43%. At 70 you get about 49%, at 75 you get about 55%, at 80 you get about 61%, at 85 it's about 67% and as you get into your 90's you get 75%.