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Reverse Mortgage
January 19, 2023
A reverse mortgage is, in a nutshell, a loan. A homeowner 62 or older with significant home equity can borrow against the value of their property and receive cash in the form of a lump sum, set monthly payment, or line of credit. In contrast to a forward mortgage, which is used to purchase a property, a reverse mortgage does not require the homeowner to make any loan payments. Instead, when the borrower dies, moves away permanently, or sells the residence, the whole loan debt becomes due and payable. Federal laws require lenders to structure the transaction such that the loan amount does not exceed the home's worth. The borrower or borrower's estate is not obligated to pay the difference if the loan balance does exceed the home's value. This might occur due to a decrease in the market value of the borrower's house.
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