What is a reverse mortgage?

A reverse mortgage is specifically designed to allow homeowners to tap into the equity of their homes and convert it into cash without having to sell their property. This type of loan is particularly popular among retirees or older homeowners who wish to access some of their home’s value for expenses such as healthcare, living costs, or home renovations, while retaining ownership of the home.

In contrast to traditional mortgages, where the borrower makes monthly payments to the lender, a reverse mortgage allows the homeowner to receive payments from the lender. As the homeowner receives these payments, the loan balance increases over time, which is then repaid when the homeowner sells the home, moves out, or passes away. Thus, the essence of a reverse mortgage is to provide financial flexibility by utilizing the home equity as a source of income while the homeowner continues living in their home.