How does a reverse mortgage work?

A reverse mortgage operates by allowing homeowners, typically those who are older (usually 62 years or older), to borrow against the equity they have built up in their home, without the obligation to make monthly mortgage payments. Instead of the homeowner making payments to the lender, the lender makes payments to the homeowner. This arrangement helps seniors access the cash tied up in their homes, which can be used for various purposes such as covering living expenses, medical costs, or home improvements, enhancing their financial flexibility.

When the homeowner passes away, sells the home, or moves out, the loan becomes due, and the home is typically sold to repay the amount borrowed. The key feature of a reverse mortgage is that it allows the homeowner to maintain ownership of their home while benefiting from its equity, and again, no monthly payments are required as long as the homeowner continues to live in the house. This makes it a valuable resource for seniors who want to supplement their retirement income.