A reverse mortgage is where an older person can use the equity in his or her home to obtain a loan in which the mortgage company pays the homeowner money (either a lump sum, monthly payments, or a line of credit that can be drawn upon) and allows the homeowner to continue to live in the home as long as the individual is able to. It is called “reverse mortgage” because the homeowner makes no payments to the mortgage company but receives payments instead. In exchange, when the homeowner dies or has to move to an assisted living facility, the lender gets ownership of the home unless the loan is paid in full.
To obtain a reverse mortgage, you must have sufficient value in your home. Be sure you are dealing with a reputable lender because there are many lenders offering very unfair reverse mortgages and taking advantage of the elderly. Reputable lenders often have required counseling as part of the loan process. Reverse mortgages are generally only for those 62 and older. Trusted sources for general information include the US Department of Housing and Urban Development (HUD), AARP and the National Consumer Law Center.