When reverse mortgages are mentioned, often the reaction is similar to offering someone toxic waste.

In the past, that reaction had some validity. But now the reasons for hating reverse mortgages have been mitigated or eliminated entirely, and FHA and HUD even regulate many of these offerings.

A reverse mortgage allows a homeowner over age 62 to borrow against the equity in their home. The reverse mortgage then becomes due when the borrower moves out or dies.

Reverse mortgages are generally intended for a primary residence, not a vacation home or a rental property. The lender will probably require the borrower to confirm that the home is a primary residence at the time the mortgage is made and might require periodic confirmation that it’s still the primary residence. When the borrower moves, if there is still equity in the home it goes to the borrower. If not, the mortgage company doesn’t pursue the borrower – or the borrower’s estate — for the difference.

There are a couple of primary types of reverse mortgages. One gives proceeds once. The other provides a line of credit. And some reserve mortgages provide some of both. The reserve mortgage might pay off an existing mortgage or might provide cash flow or funds to invest.

Next week, we’ll explore who might benefit from a reverse mortgage and which types of these loans might best fit their needs.