(NW Source) -- For a 70-year-old homeowner in New York with a house worth $500,000, World Alliance may loan as much as $240,000, with $17,000 in fees, including mortgage insurance. The interest rate for the loan is tied to the monthly London Interbank Offered Rate plus a margin and starts at 4 percent as of June 5. The rate may go as high as 13.5 percent if interest rates rise substantially. Those weighing a reverse mortgage are required to meet with HUD-approved counselors who explain the procedures and potential fees before the loan can be processed. "People are living longer and with the prices of health care, gas and food all rising, senior citizens have to be very, very careful with their homes, which are their nest eggs," said Jim Dau, a spokesman for the AARP in Washington, D.C. "It's often the most basic asset they have." Homeowners age 62 or older with significant equity in their homes can apply for an FHA-backed reverse mortgage of up to $362,790. Fees and closing costs for the mortgage are taken out of the initial approved amount. Homeowners can choose to take the funds three ways: Lump sum: Homeowners can take the entire loan in one payment. Periodic payments: The lender pays a regularly occurring fixed amount to the homeowners until the balance is distributed. Line of credit: Homeowners can take payments from the loan when desired. Repayment: After homeowners die or move, the loan becomes due.
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