What is Reverse Mortgage ?

Defination: 

  • A Reverse Mortgage is otherwise known as Home Equity Conversion Mortgage (HECM).
  • It  is a special type of home loan for older homeowners.
  • It requires no monthly mortgage payments.
  • Borrowers are still responsible for property taxes and homeowner's insurance.
  • So, it is a type of mortgage in which a homeowner can borrow money against the value of his or her home.
  • No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold.
  • After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.
  • Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage .