Q: How Does a Reverse Mortgage Work? A: Home Ownership Like a traditional mortgage your name remains on the title and and you are responsible for maintaining the home, paying taxes, and keeping proper homeowners insurance. When the loan term is up, or the homeowner leaves the home, the loan is then repaid along with interest and any applicable fees. However a homeowner can never owe more than the value of the home. Fees Reverse mortgages are generally more expensive than forward mortgages. However the fees can be added into the loan balance, similar to a typical refinance. Fees can vary but 3% of the loan amount is not an uncommon figure to use as a guide. Loan Amounts Loan amounts are not as straight-forward as with a traditional 30-year fixed mortgage. The loan amount with a reverse mortgage depends upon the value of the home, age of the borrower, interest rate and withdrawal method. Debt Pay-off Reverse mortgages are known as “non-recourse” loans. This basically means that the lender cannot try to collect more money than the home is worth. For example, a bank may lend $100,000 on a reverse mortgage, but when the homeowner vacates the home, the homes value may only generate $80,000 to pay back the note. The bank cannot come after any other personal assets or the assets of the homeowners heirs, in an attempt to collect the additional $20,000. Repayment Repayment is due when the last surviving homeowner vacates the home, or if all borrowers leave the home for more than 12 months. There may be additional reasons that the bank calls the note, or demands repayment. In general they all have to do with situations that puts the banks funds at risks, such as non-payment of taxes, failure to keep the home maintained, or failing to insure the property. Other risks include your home being abandoned or rented, or legal suites being filed against the home.