What is Reverse Mortgage

Reverse mortgage is a loan against your home that the borrower does not have to pay back until he lives there. This is a method to get cash value from your house without leaving it and even worrying about repaying it. As you can see reverse mortgage is very different from the “normal” or “usual” mortgage schemes.


Some key aspects of reverse mortgage are:

  1. Reverse mortgage are available only to seniors citizens, to be specific, above 62 years of age. Younger people do not qualify.
  2. Borrower owns the home and lives in it
  3. Borrower doesn’t have to pay anything back to the lender until he dies, or sell off the home or move out of his home permanently
  4. As there are no payments to be made to the lender, there is no minimum income requirement to qualify for a reverse mortgage, one just need to own a home
  5. Payments from the lenders are available in various forms:

    • Single time, lump sum cash payments
    • Regular monthly cash payments
    • Get when you need by extending a credit line account
    • It can also be combination of the above – e.g. part lump sum payment followed by a monthly payment etc.

Reverse mortgage – how it works? 

Reverse mortgage process is as follows:

  1. Step1: Reverse mortgage lender figures out how much it can lend you based on your home value, your age, and prevailing interest rates
  2. Step 2: Based on your payment preference, provides you the cash which is some percentage of the money you would have gotten if you’d decided to sell your home
  3. Step 3: When the borrower dies, the lender gains money by selling off the property. Alternatively if the borrower sells off his home, he can repay the loan and keep the reaming profit (if any), with him.

Reverse mortgage, how it is different from home loan?

  1. There is no income qualification for reverse mortgage while for a home loan there is
  2. There are no monthly repayments as done in case of home loans
  3. As there is no repayment, there is no risk of loosing your hose because of not paying. It always belongs to you.

Reverse mortgage is one many ways in which senior citizens can take care of their finances while still owning their house. Some common situations when reverse mortgage is considered as an option is:

  1. Paying off exiting loans – paying various loans, can be for house, car, or any other thing
  2. Paying for prescription drugs – health care is very important aspect for senior citizens and reverse mortgage can help in paying for prescription drugs
  3. Vacation planning – plan your dream vacation which was pending for long!
  4. Home modification / renovation – renovate / modify home to suit requirements
  5. Kitchen / bathroom repair

The above are some of the very common things borrows do with their reverse mortgage payments. The flexibility to take payments ensures that many of their needs are met with comfort and without metal tension of repayment.