reverse mortgage loan


A mortgage loan where the lender loans a percentage of a property's value as a lump sum or annuity, with interest accumulating until the property is sold or the loan paid off.

The reverse mortgage is typically marketed toward older home owners who have paid off their mortgage loans, either as a way to provide themselves with a regular income, or as a way to access a lump sum of cash.

Lenders emphasize that the borrower "doesn't need to worry about interest" because the interest will be taken care of when the home is sold (presumably, after the borrower dies). If the home is sold for less than the amount owing, the heirs are not liable.

In reality, a reverse mortgage takes the equity built up in a home and slowly uses it up. It is a way to "un-pay" your mortgage, getting back what you put in (money) but giving up what it bought you (equity).

Since many people would agree that a home is a solid investment, the benefits of a reverse mortgage are questionable.

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