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Mortgage Reference -
Mortgage Glossary
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Reverse Mortgage - A loan that enables retired homeowners to use their home’s equity without selling it. A lending institution makes a check out to the homeowner each month. This payment is really a loan against the value of a home. Because the payment is a loan, it’s tax-free when the homeowner receives it. On the other hand, the payments and interest charges are added to the loan each month, so the balance of a reverse mortgage increases over time, which then has to be repaid to the lender when the loan reaches maturity. Reverse mortgages are not for everyone, since outliving the loan, can put a substantial burden on a homeowner with a fixed income.
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