Most of us know what a mortgage is. A lender payday loans you money to purchase a home. In exchange for that money the lender expects that each month you will pay back a certain portion of the principal of that loan, plus a set amount of interest.

In other words, you are expected to make a mortgage payment each month, and at the end of a specified number of months the loan will be paid back, and you will own your house, free and clear.

That concept is fairly easy to grasp.

Stand that concept on its head and you have the basis of a reverse mortgage.

With a reverse mortgage a lender loans you money and charges you interest, just as they would with a forward mortgage. But that’s where the similarities end.

With a reverse mortgage you don’t make monthly mortgage payments. Instead of your debt becoming less and less with each passing month, with a reverse mortgage your debt grows and grows as time goes on and the loan is only paid back (with interest and other charges) when the last of the borrowers dies, or when the property is sold, or under certain other specified conditions.

For an elderly homeowner, who has made mortgage payments for years and who now has a large cash equity in their property, a reverse mortgage allows that senior to use the cash value of their home for day to day living expenses without any monthly payments on the money.

To qualify for a reverse mortgage loan, all of the borrowers must be 62 years of age or older and the property must be your primary residence. Since you do not make monthly payments on a reverse mortgage, you do not need to have an income to qualify.

The amount of money that a borrower can get with a reverse mortgage depends on several factors. One factor is the age of the borrower(s). The older the borrower(s) the larger the loan. In other words, the longer you wait to take out a reverse mortgage, the more money you are likely to get.

Other factors include the value of the home, the amount of equity in the home, the condition of the property, and the location of the property.


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