An elderly homeowner who wishes to continue living at home can get access to money that doesn’t have to be repaid until he or she sells the house or dies. The upfront costs of the reverse mortgage loans are high, and they are not recommended for those planning to sell their house in the near future. Paiva’s closing costs were $13,325, which included a payment of $5,760 for mortgage insurance from the U.S. Department of Housing and Urban Development’s Federal Housing Administration. FHA insures an estimated 90 percent of reverse-mortgage loans issued in the United States. Most borrowers roll over the loan costs into their balance to keep their initial outlay of cash to a minimum.

To be eligible for a HUD-insured reverse mortgage, borrowers must be at least 62 years old. The amount that can be loaned depends on the borrower’s age, the amount of equity, and the interest rates. Loans insured by the government cannot exceed a certain limit currently $362,000, according to Peter Bell, president of the National Mortgage Lenders Association, even if the value of the house is much higher. Uninsured loans are offered at higher amounts, and at higher costs. In the fiscal year that ended September 30, 2006, 76,351 federally insured reverse mortgages, also known as home-equity conversion mortgages, were issued, up 77% from the previous fiscal year, White said. In Rhode Island, the number of reverse mortgages increased from 198 to 338. As the baby-boom generation begins to retire, the numbers are expected to grow.

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