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The Curious Bag
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A traditional mortgage is one in which a bank or other lender purchases your home on your behalf and you pay them back over a period of time. As you pay back the loan, you increase the home equity you have (the value of your home minus the amount you owe). In a reverse mortgage, the bank or other financial institution pays you, but the payments reduce your equity.
New Kind of Home Loan
A reverse mortgage is like a home loan that pays you. As long as you live in your home, you do not have to pay it back. But the money will have to be repaid when you die or move out of your home.
Lending Requirements
People who want to get a reverse mortgage must be at least 62 years of age and must own their homes. You must also live in your home as your principal residence in order to qualify.
Payments
When you have a reverse mortgage, you can generally choose your own payment options. You may get monthly payments, one lump sum, a line of credit or a combination of these options. You can use this money however you choose.
Home Ownership
When you have a reverse mortgage, you still own your own home. This means you still have to carry homeowner's insurance and pay property taxes on the home.
Selling Your Home
When you die or sell your home, the loan must be repaid. The remaining equity in your home, if there is any, is yours or your estate's to keep.
Source:
AARP: Reverse Mortgage Fact Sheet
HUD: Top Ten Things to Know If You're Interested in a Reverse Mortgage
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