What is a reverse mortgage?

A reverse mortgage is a financial product specifically designed for homeowners, typically older adults, that allows them to convert part of the equity in their home into cash. This loan option does not require monthly payments; instead, the loan is repaid when the borrower either sells the home, moves out of the home, or passes away. The payments received can be structured as monthly disbursements, a lump sum, or a line of credit, depending on the borrower's needs.

The key aspect of a reverse mortgage is that it provides funds based on the equity accumulated in the home, allowing homeowners to access the value of their property without the need to repay the loan during their lifetime. This feature distinguishes it from traditional loans that require immediate repayment or regular payments.