A reverse mortgage is a type of home equity loan that’s reserved for older homeowners and does not require monthly mortgage payments. Instead, the loan is repaid after the borrower moves out or dies.
Reverse mortgages are often considered a last-resort source of income, but they have become a great retirement planning tool for many homeowners.
When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays you. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. The money you get usually is tax-free. Generally, you don’t have to pay back the money for as long as you live in your home. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Sometimes that means selling the home to get money to repay the loan.
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