What is a Reverse Mortgage?

The reverse mortgage is one of the most confusing technical terms out there in the market today. Much work is being done to help clarify just exactly what a reverse mortgage is and assure that those that qualify for it, and need it understand it well enough to apply for one. It can be very beneficial for many senior citizens if they fall under certain criteria.

To begin with, a reverse mortgage is only available for those over the age of sixty two and is often an alternative to a home equity loan. The major difference between a reverse mortgage and a home equity line of credit is that with a reverse mortgage you don't make traditional payments back on the loan. With a home equity loan you need to pay it back monthly as soon as you start using it. A reverse mortgage is usually applied for by those who either own their home outright or have significant equity in it. If you owe on the home you can still get a reverse mortgage but the company that you get the reverse mortgage from becomes the first lien holder. In a reverse mortgage you are given a loan, a line of credit or a lump sum for the amount of equity in your house (plus a few other conditions) and the pay back does not occur until you leave, sell, or die and your house is transferred to a new owner. In that case the reverse mortgage is then paid back with the proceeds of the sale. If the reverse mortgage is less than the proceeds the rest of the proceeds go to the estate of mortgage holder.

Reverse mortgages are very complicated but can be very beneficial. Make sure that you have a lawyer involved in yours before you sign for it to assure your rights are totally covered.