What is a reverse mortgage? I hear these advertise often but don't understand how they are different from a regular mortgage! Can somebody explain please what they are and when they would be useful? Thank you!
See Reverse Mortgage from Wikipedia, the free encyclopedia:
A reverse mortgage (or lifetime mortgage) is a loan available to seniors, and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).
In a conventional mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, then the debt on the property increases each month.
In a reverse mortgage, you sell your house one month at a time. It's a good option if you need the income, and don't care to leave your house as an inheritance as part of your estate.