A home equity loan will require that you make regular monthly payments, whereas a reverse mortgage loan does not require monthly mortgage payments (borrowers must remain current on taxes, homeowner’s insurance and HOA dues as applicable).
FHA/HUD reverse mortgages specifically state that you cannot be forced out of your home. The only requirements of a reverse mortgage are that you continue to keep your home as your primary residence, in a good state of repair, with property taxes paid and insurance coverage in place.
The borrower retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower secured by the home / property. Because ownership of the home is retained, the borrower is responsible for the payment of property taxes, insurance and home maintenance.
Even if you have an outstanding first mortgage, or some other real estate liens (i.e. a home equity loan, tax lien, etc.), you still may qualify for a reverse mortgage. The proceeds of the reverse mortgage must first be used to pay off such debts however. This is a significant benefit as many borrowers use a reverse mortgage loan simply to eliminate their mortgage or home equity loan payments.
You are not required to make monthly mortgage payments on your reverse mortgage (borrowers must remain current on property taxes, homeowner’s insurance and HOA dues as applicable).
Borrowers can leave their home to their heirs. When the borrowers pass away, the heirs may either pay the balance due on the reverse mortgage (principal plus accumulated interest and MIP) and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, any remaining equity after the reverse mortgage is repaid is theirs to keep.
Reverse mortgage payments should not affect Medicare or Social Security benefits. Additionally, reverse mortgage payments should not affect Social Security Income (SSI) benefits or eligibility as long as any reverse mortgage advances are spent within the month they are received (Consult your Social Security, Medicare or other financial advisor to determine how reverse mortgage payments may affect your particular situation).
Reverse mortgage funds are considered loan proceeds and are therefore not taxable income. (Consult your tax advisor).