A reverse mortgage is loan available to homeowners who are 62 years or older that enables them to convert part of the equity in their home into cash.
The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction for how reverse mortgage proceeds can be used.
The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed. Instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
You are not required to pay back the loan until the home is sold or otherwise vacated. As long as you live in the home, you are not required to make any monthly payments towards the loan balance, but you must remain current on your property taxes, homeowners insurance and condominium fees (if you live in a condo). .