Similar to a conventional mortgage, a reverse mortgage loan allows homeowners to borrow money using their home as collateral.
Similar to a standard mortgage, the title to your property remains in your name when you obtain a reverse mortgage loan. In contrast to a conventional mortgage, reverse mortgage loans do not require monthly mortgage payments.
The loan is repaid when the borrower vacates the property. Each month, interest and fees are added to the loan total, causing the sum to increase. In order to qualify for a reverse mortgage loan, homeowners must pay property taxes and homeowners insurance, utilize the home as their primary residence, and maintain the property in excellent shape.
With a reverse mortgage loan, the homeowner’s obligation to the lender increases over time. This is due to the monthly addition of interest and fees to the loan total. Your home equity drops as your loan balance climbs. It is a loan where borrowed funds plus monthly interest and fees equal an increasing loan balance. Eventually, the homeowners or their heirs will be required to repay the debt, typically by selling the property.