Reverse Mortgage

Reverse Mortgage

A special type of loan used to convert the equity in a home into cash. The money obtained through a reverse mortgage is usually used to provide seniors with financial security in their retirement years.

Notes:

The reverse mortgage is aptly named because the payment stream is reversed. Instead of the borrower making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the borrower. While a reverse mortgage loan is outstanding, the borrower owns the home and holds title to it, without having to make any monthly mortgage payments.

See also: Mortgage

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Reverse mortgage

A mortgage agreement allowing a homeowner to borrow against home equity and receive tax-free payments until the total principal and interest reach the credit limit of equity, and the lender is either repaid in full or takes the house.