Instead of paying the bank a mortgage payment each month, with a reverse mortgage, the bank pays you. But there are some strings attached. You must be 62 or older and have equity in the home you own to qualify for one. A reverse mortgage is a loan, and it must be paid back when the homeowner dies or vacates the home for a year or more. The estate pays back the loan.
Purpose of reverse mortgage
The purpose of a reverse mortgage is to help senior citizens who are cash poor afford daily expenses by using the equity in the home. But people can use the money a reverse mortgage provides any way they choose. The product is not for everyone because there are many costs associated with it, such as closing costs, upfront mortgage insurance premium (MIP), and interest that is due when the reverse mortgage is paid off.