What is a reverse mortgage?

A reverse mortgage is a financial arrangement specifically designed for homeowners, typically aged 62 and older, allowing them to convert part of the equity in their home into cash. This means that instead of making payments to a lender, the homeowner receives payments, which can provide much-needed funds for various expenses such as healthcare, home renovations, or other living costs. The loan is repaid when the homeowner sells the house, moves out, or passes away.

This option stands out because it clearly captures the essence of a reverse mortgage, focusing on how it operates by exchanging equity for payments, rather than being a traditional loan that requires monthly repayments. Understanding this financial tool is critical, as it differentiates a reverse mortgage from other types of mortgages that require borrowing to purchase property or investment purposes.