What is a Reverse Mortgage?

A reverse mortgage is a home loan that allows the homeowner to receive money from the bank instead of paying money to a bank. The usual roles of borrower and lender are reversed. Here the homeowner with a reverse mortgage receives money from the bank instead of paying money to the bank. The bank uses the home as collateral for the “reverse mortgage”. Usually, when the homeowner sells the house, or dies, the home loan is paid off. However, if you want to take a reverse mortgage out on your home you must be very careful that the lender will not collect until you sell the house or die. You must also be careful to avoid what are called “shared appreciation” loans. With a “shared appreciation” loan the lender not only collects the amount owed, but also collects a percentage of the appreciation that occurs over the life of the loan. If you apply for a “reverse mortgage”you should have an attorney review the terms before you sign the loan documents. Like any legal document, reverse mortgages can be confusing; you can’t afford to find out what your loan says after you have signed all the papers. A reverse mortgage does not require the homeowner to make any payments while he or she is alive. This is different than a home equity line of credit, which is a loan that must be immediately repaid. Some reverse mortgages are often insured by the Federal Housing Administration. If you take a reverse mortgage you want to be sure to get a mortgage which is insured by the federal government. As a...