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Reverse Mortgage

A Reverse Mortgage Loan is a loan against your home that you don't have to repay as long as you live there. In a typical mortgage loan (15 year, 30-year, adjustable rate, and so on), your monthly loan payments reduce your debt over time until you've paid it all off. Meanwhile, the equity in your home is rising as you repay your mortgage and as your property value appreciates.

The bank or reverse mortgage lender sends you money and your debt grows larger and larger over time as you keep getting cash advances on the property. You make no loan payments, and subsequently, interest is added to the outstanding loan balance.

To summarize, reverse mortgages are different from typical residential home mortgages in two important respects:

• To qualify for typical home mortgage loans, the lender checks your credit rating and income to see how much you can afford to pay back each month. With a reverse mortgage loan, however you don't have to make any monthly loan payments. Thus, your financial situation generally has nothing to do with getting a loan or determining the amount of the loan.

• With most home loans, you can lose your home to foreclosure if you fail to make your monthly loan payments. With reverse mortgages, you can't lose your home by failing to make monthly loan payments because you don't have any to make.