Although the name is perhaps slightly inaccurate, this type of loan is an easy and convenient solution that allows older people to borrow money. The reverse mortgage definition is that it is a loan that is based on the equity in your home that has built up, and in that respect it is similar to a traditional home equity loan, or second mortgage.
However, unike a line of credit, you do not need to make monthly payments on the loan, and after your death when the house is sold, is when the loan is paid back. The advantage of this type of loan is obvious; it allows you to borrow an often substantial sum, without having to budget to pay it back. The amount that you can potentially borrow is based on the value of your home, and the cash can be used for anything you need it for.
To qualify, you must own your home outright, which must be your main residence, rather than a vacation home. You must be 62 or over, although you do not necessarily need to be in good health, or have an excellent credit score. The loan is not based on your income, so any earnings are not taken into consideration.
There can be various charges and fees associated with a reverse mortgage, and if you are planning to move soon, it may not be the best financial option for you. However, as a source of cash, it is a program that has helped millions of older homeowners.