A reverse mortgage almost sounds too good to be true. Instead of the borrower making monthly payments to the lender, with a reverse mortgage the lender makes payments to the borrower. A reverse mortgage is similar to a home equity loan in that it allows older homeowners that are 62 and over to use the equity in their home as tax free income.

The money that you are eligible to receive is based upon the amount of equity that you have in your home. The more your home is worth and the less the balance is on your current mortgage, the more you are eligible to borrow. There are no particular income or health requirements to be qualified for a reverse mortgage. In fact the only requirements are that you be at least 62 years of age as well as have a low balance on your current home mortgage.

This loan is commonly referred to as a “rising debt loan” because instead of paying down a loan balance and increasing the equity you have in your home, your home’s equity is decreasing as a result of the increasing debt. Also, keep in mind that a reverse mortgage will become due in full if you move. So if you want funds for a down payment on a new home or even just cash to spend after you move, it would be wise not borrow the full amount of your home’s equity.

Recently the Obama administration increased reverse mortgage loan limits from $417,000 to $625,500 in a move to better serve senior home owners that wish to use tap into their home’s equity during retirement age. Currently, an estimated 13 million seniors in America are qualified for a reverse mortgage and around 100,000 take advantage of the loan every year. Expect this number to increase over the next couple of years as more Americans in the baby boomer generation reach the age of 62 and subsequently become eligible for the program.