A "Reverse Mortgage" is a special type of loan made to older homeowners, must be 62 or older, to enable them to convert the equity in their home to cash to finance living expenses, home improvements, in-home health care, or other needs.
    
With a reverse mortgage, the payment stream is "reverses". That is, payments are made by the lender to the borrower, rather than monthly repayments by the borrower to the lender, as occurs with a regular home purchase mortgage.
    
A reverse mortgage is a sophisticated financial planning tool that enables seniors to stay in their home and maintain or improve their standard of living without taking on a monthly mortgage payment. The process of obtaining a reverse mortgage involves a number of different steps. The first, most widely available reverse mortgage in the U.S. was the federally-insured Home Equity Conversion Mortgage, which was authorized in 1987.
    
A reverse mortgage is different from a home equity loan or line of credit, which may banks and thrifts offer. with a home equity loan or line of credit, an applicant must meet certain income and credit requirements, begin monthly repayments immediately, and the home can have an existing first mortgage on it. In addition, there is no restriction on the age of borrowers.
    
Borrowers usually have a choice of receiving the proceeds from a reverse mortgage in the form of a lump-sum payment, fixed monthly payments for life, or line of credit. Some types of reverse mortgages also allow fixed monthly payments for a finite time period, or a combination of monthly payments and line of credit. The interest rate charged on a reverse mortgage is usually an adjustable rate that changes monthly or yearly. However, the size of monthly payments received by the senior doesn't change.
    
Some reverse mortgage products also involve the purchase of an annuity that can assure continued monthly income to the senior homeowner even after they sell the home. The size of reverse mortgage that a senior homeowner can receive depends on the type of reverse mortgage, the borrower's age and current interest rates, and the home's property value. The older the applicant is, the large the monthly payments or line of credit. This is because of the use of projected life expectancies in determining the size of reverse mortgages.
    
Seniors do not have to meet income or credit requirements to quality for a reverse mortgage. Unlike a home purchase mortgage or home equity loan, a reverse mortgage doesn't require monthly repayments by the borrower to the lender. A reverse mortgage isn't repayable until the borrower no longer occupies the home as his or her principal residence. This can occur if the sole remaining borrower dies, the borrower sells the home, or the borrower moves out of the home to a nursing home.
    
The loan may be repaid by the borrower or by the borrower's family or estate if desired, with or without a sale of the home. If the home is sold and the sale proceeds exceed the repayment obligation, the excess funds go to the borrower or borrower's estate. If the sales proceeds are less than the amount owed, the shortfall is usually covered by insurance or some other party and is not the responsibility of the borrower or borrower's estate. In genera, the repayment obligation of the borrower or borrower's estate can't exceed the value of the property. In general, a borrower can't be forced to sell their home to repay a reverse mortgage as long as they occupy the home, even if the total of the monthly payments to the borrower exceeds the value of the home.
    
For more information about Reverse Mortgages, :
Mortgage Loan Place, the FHA Experts can help with:
Reverse Mortgages and FHA Refinance Loans.