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What is a reverse mortgage loan?
A reverse mortgage is a loan that allows homeowners 62 and older to convert a portion of their home equity into cash and defer repayment until they pass away, sell the home, or move out of the home.
Today, most, but not all, reverse mortgages are Home Equity Conversion Mortgage (HECM) loans—the only reverse mortgages insured by the Federal Housing Administration (FHA).
How does a reverse mortgage work?
With a reverse mortgage, you borrow against the equity in your home. Home equity is simply the current value of your home minus any mortgage balance(s)—if any—you owe on your home. Unlike a traditional mortgage for which you pay the lender each month, with a reverse mortgage the lender pays you (think of it as an advance on your home equity).