Reverse Mortgage

A reverse mortgage is a loan available to seniors, and is used to release the home equity in the property as either a one-lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, leaves, or sells the property.

In a regular mortgage, the homeowner makes monthly payments to the lender; which increases the equity within his or her property. After the end of the term, the mortgage has been paid in full and the property is released from the lender. A reverse mortgage is different — the home owner makes no payments, and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.

It is possible to acquire a second, or third, reverse mortgage over the increased equity in the home, if a property has increased in value after a reverse mortgage is taken out. In the United States, however, a reverse mortgage must be the first and only mortgage on the property.