• A reverse mortgage is a type of home equity loan that allows older homeowners to turn some of the equity in their home into cash while living in their home.
  
• A reverse mortgage is what it sounds like-a traditional mortgage in reverse. With a traditional mortgage, the homeowners make periodic payments to the bank until they own the home outright. In a reverse mortgage, the bank makes periodic payments to a homeowner (like a salary or other source of income), until the bank owns the house.
  
• Someone must own their own home in order To qualify for a reverse mortgage, a person must have all the equity in his or her home.
  
• Depending on the plan, a reverse mortgage becomes due with interest when the homeowner moves, sells the home, dies, or reaches the end of the pre-selected loan term.

In New Jersey, reverse mortgages:

• Can only be made to homeowners at least 60 years old;
  
• Can be for no more than 70% of the value of the property;
  
• Can be canceled at the option of the homeowner if the homeowner pays all principal and interest due up to date;
  
• Cannot include penalties for the borrower.

Subsequent Reverse Mortgages
A homeowner can enter into a second reverse mortgage with the same lender after the first mortgage has ended if:

• The value of the property has not decreased significantly during the first mortgage; and
  
• The loan is not more than 90% of the value of the unmortgaged portion of the property.

Tax Consequences

• Money from a reverse mortgage is not subject to state or Federal income tax.
  
• Money from a reverse mortgage does not affect social security benefits.
  
• Money from a reverse mortgage can affect a homeowner's eligibility for Supplemental Social Security (SSI) or Medicaid.
  
• Interest charged on a reverse mortgage is not deductible for tax purposes until it is actually paid.