Reverse Mortgage
Definition and meaning of Reverse Mortgage in real estate.
A reverse mortgage is a specialized home loan available to older homeowners that allows them to convert a portion of their home equity into cash. Unlike a traditional mortgage, the borrower is not required to make monthly payments, and the loan balance is paid back when the home is sold or vacated.
In more detail
This financial product is typically restricted to older homeowners who own their homes outright or have significant equity. The lender makes payments to the homeowner, which can be received as a lump sum, monthly payments, or a line of credit. Interest and fees accumulate over time and are added to the loan balance, which increases the debt while reducing the remaining equity.
The borrower remains responsible for paying property taxes, homeowners insurance, and maintenance costs. The loan is typically repaid when the borrower passes away, sells the home, or moves into a long-term care facility.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Age requirement | Older homeowners, typically age sixty-two or older |
| Repayment trigger | Sale of home, permanent move, or death |
| Ongoing obligations | Property taxes, insurance, and maintenance |
An elderly homeowner with a fully paid-off house obtained a reverse mortgage to receive monthly payments that help cover their daily living and medical expenses.
Frequently asked questions
Can you lose your house with a reverse mortgage?
Yes, you can lose the home if you fail to pay property taxes or homeowners insurance, or if you fail to maintain the property.
Do heirs have to pay back a reverse mortgage?
Heirs are not personally liable; they can choose to pay off the balance to keep the home, or let the lender sell the property to satisfy the debt.
Related terms
Sources & references
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