With a traditional home equity line of credit, or second mortgage, the borrower must have sufficient income versus debt ratio to qualify for the loan. Once the borrower secures the loan, the borrower must pay monthly mortgage payments.
The reverse mortgage is different in that it pays the borrower. But the most attractive feature of the reverse mortgage is that it is available to the borrower regardless of income. The borrower does not make payments on a reverse mortgage, because the loan is not due as long as the house is borrower’s principal residence.
Like all homeowners, the borrowers are still required to pay real estate taxes, insurance and other conventional payments like utilities. With an FHA Home Equity Conversion Mortgage (HECM) one cannot be foreclosed or forced to vacate your house because of "missed mortgage payments." In fact, this is the main feature and most attractive feature of a reverse mortgage.
The amount one can borrow depends on borrower’s age, the current interest rate, and the appraised value of the home or FHA's mortgage limits for the area, whichever is less. Generally:
The more valuable the home, the more one can borrow;
The older the borrower is, the more she can borrow;
The lower the interest rate is, the more one can borrow.
You can use an online Reverse Mortgage calculator like the one on the AARP website to get an idea of what you may be able to borrow.