Reverse mortgages give payments to the homeowner by taking some of the home's equity and converting it into cash, according to the Federal Trade Commission. This is a type of cash advance on the equity of a home.
Reverse mortgages provide tax-free money that the homeowner does not need to pay back if he continues living in his home, as stated by the Federal Trade Commission. If the homeowner moves out, sells the home or dies, the estate must repay that money. Selling the home to pay back the loan is sometimes necessary if the person dies.
Three types of reverse mortgage are available in California, including a single-purpose reverse mortgage, proprietary reverse mortgage and federally-insured reverse mortgage, notes the Federal Trade Commission.
Single-family homes, condominiums and some manufactured homes are eligible for reverse mortgages, according to Mortgage California; however, co-ops and mobile home aren't usually eligible.
With a reverse mortgage, the homeowner keeps the title, according to the Federal Trade Commission. It does not affect the individual's Medicare or Social Security benefits. There are some fees involved in getting a reverse mortgage, including servicing fees, origination fee and closing costs. A federally-insured reverse mortgage may also charge mortgage insurance premiums.