Knowing some of the finer details of home reverse mortgage will help you better understand the concept. Others immediately dismiss reverse mortgage as an option because they think of it as a very complex procedure. A simple illustration of the whole cycle maybe likened to being able to sell a home after the owner dies but being able to enjoy the profits while still alive.
The mortgage is specifically open to people who are at least 62 years old and own their homes. They can get monthly payouts based on the total equity of their home, in simpler terms, the cash value. Credit scores and income do not play a role on the eligibility of an applicant. Cash received by the borrower is not restricted in relation to how he spends such. Monthly payouts are also tax free.
The home owner retains the title of ownership over the property until the final installment is paid. The final installment is not based on the equity of the home but on the life of the borrower. However, money owed to the lender will never exceed the actual cash value of the home when sold despite the possibility that the total payout received would exceed the home equity. Surviving heirs are therefore protected from inheriting any due amounts.
Reverse mortgage is obviously still a mortgage, only in reverse. Instead of receiving a lump sum that you have to pay in monthly instalments after, you receive monthly sums of money that you will have to pay in lump sum after the period of mortgage. Both loans require the home as a security. A regular mortgage requires monthly payments to be paid to keep the house from being sequestered. In reverse mortgage, the house is sequestered as payment for the whole amount received only upon the death of the borrower.