Reverse Mortgages

Reverse Mortgage is basically a mortgage loan that enables homeowners to borrow money from lenders against the equity of their home and typically, it requires old-aged homeowners who have paid off all their debts.

The key advantage of a reverse mortgage is that the borrower does not have to repay the monthly mortgage payments as well as live in his/her own house. But if the owner moves to any other place permanently or dies, he/she will be in debt to the full amount. 

This type of mortgage or loan is widely used for those who have retired or struggling to pay their living expenses and bills. In a word, It allows the homeowners to convert or turn their home's equity into tax-free income but it is also tied up to the value of that property. In most cases, borrowers are allowed to avail less than 50% of their main valued amount.

Types of Reverse Mortgage

There are three major types of these mortgages and they are listed below -

  1. Home Equity Conversion Mortgage (HECM)
  2. Proprietary reverse mortgage
  3. Single-purpose reverse mortgage


For example, Mr. Ross is a 63 years old retired service holder who has been struggling to pay his supplementary bills, medical bills etc. living expenses. To tackle this situation, he decided to take a reverse mortgage as he owns his house upright and now he is borrowing money against the value of his house, he doesn't require any monthly payments and he is paying all the bills regularly.


Use of the Term in Sentences

  • Reverse Mortgage is widely known as a type of loan that creates an opportunity for older people to borrow money if he/she owns a home. 
  • Reverse Mortgage is not for everyone as it comes with disadvantages that include Interests and also the future generations of that borrower might not get the full equity of that house. 

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