A reverse mortgage is a loan that lets elderly homeowners (at least 62 years of age) to use the portion of the equity in their home as a tax-free income, without the need to sell the home, surrender the title, or take out a new mortgage. The number of homeowners resorting to this method to earn additional retirement income, pay the medical care expenses, opt for home improvement or have some money in hand to tide over the emergencies is rising day by day. As it is a new product, some people hold wrong notions about a reverse mortgage. They think bank hands over the money and take away your house. Here we answer some frequently asked questions.

Contrary to popular belief, reverse mortgages are not meant for distressed people. Actually it is a great financial planning tool meant for people from all strata of the society.

To qualify, you must be 62 or if you and your spouse have a mortgage, then both of you should be at least 62. Besides you must also own a part of equity in the home.

Even if you are still carrying on the first mortgage, you can be eligible to get a reverse mortgage. But you must use the money from the loan to repay your first mortgage.

The amount of loan you can get is based on various factors like the age of your home, the market value of your home, your age while closing and the rate of the interest.

You can avail of this loan either as a lump sum, line of credit, monthly payments or a blend of monthly income and a line of credit.

You do not have to worry about being taxed on these funds by the government. The money is tax-free. It is your money and not an extra income.

But before getting a reverse mortgage, it is advisable to receive counseling. There is no need to contact a lawyer or accountant, but it is highly recommended.

You do not have to worry about the house being taken away from you as the title of the house remains with you.

After your death, your home is handed over to your heirs and the term of mortgage expires. Your heirs can either pay the mortgage to retain the home or sell it off to repay the loan. Any additional proceeds from the sale remain with the heirs.

However you the outstanding amount will never exceed the value of the house. Also there are no prepayment penalties.

If you shift residence, the mortgage is due and should be paid back.