With a traditional forward mortgage, over time your debt decreases and your home equity increases. You borrow money to purchase a home and make monthly payments.

A reverse mortgage is a loan against your home that you don’t have to pay back for as long as you live there. You can turn the value of your home into cash without having to make monthly payments. This money can be taken as a lump sum, monthly cash payments to you or in a creditline account where you decide how much cash is available to you.

To qualify for a reverse mortgage, you must be 62 or older and own your home. With a reverse mortgage you don’t have to pay anything back until you die, permanently move out of your home or sell it. Unlike forward mortgages, where your income must be sufficient to qualify, you need not have any income to qualify for a reverse mortgage because there are no required monthly payments.

As you take loan payments you will be “spending down” the equity in your house. When the loan is over, your heirs must repay the loan plus the interest. During the term of the loan you are still responsible to pay the taxes and insurance on your home.

Before making any decisions regarding a reverse mortgage, there are several factors to consider. We will cover these in future posts.