Some elderly borrowers may benefit from a Federal government decision to reduce upfront costs of reverse mortgages in the US.

Reverse mortgages are generally for the elderly aged over 62 and have homes that they can convert into equity. The home owner, who takes the loan need not repay or pay interest until he sells the home or dies. The mortgage company then takes over the assets of the elderly person. But there is a catch, the person who takes the reverse mortgage needs to pay a premium upfront and also an annual charge.

The concept of reverse mortgage, which is hugely popular in the US, is also being experimented in countries such as India. This allows a person to actually take benefit of real estate investments he has made, while ensuring that he has sufficient money to fund his life till death.

Now, the Federal Housing Administration may give elder citizens an opportunity not to pay upfront costs, but reducing the total loan a person can take. The upfront mortgage premium is around 0.1% of the total loan a person takes, but by not paying it, the senior citizen has an option of taking a 10% reduction on the loan he wants to take.

HUD is looking at options to provide a lower-priced home-equity conversion mortgage option, said LemarWooley, a spokesman for the U.S. Department of Housing and Urban Development, Real estate portal RIS media reported.

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