A reverse mortgage allows homeowners over the age of 62 to receive a monthly or lump sum payment on their home’s equity. A lender typically pays a homeowner according to a formula derived from the homeowner’s age. The current interest rate and the appraised value of their home are subject to regulations administered by the United States Department of Housing and Urban Development.

Homeowners can get more money the older they are and the more valuable their home. Reverse mortgages differ from traditional mortgages because no repayment is required until the homeowner passes away, or ceases to use the home as their primary residence.

Once a homeowner takes a reverse mortgage, that individual can choose different ways to receive their funds, either via “tenure,” receiving monthly payments, or via a “line of credit,” which is essentially a lump sum payment the borrower can pull from at any time. So long as the borrower remains in the home and continues to pay taxes and insurance, the homeowner will never owe more than what the home is worth. (more…)