In banking terminology, the term Reverse Mortgage refers to a loan arrangement between a homeowner and a lender, usually a financial institution like a bank. The Reverse Mortgage occurs when the homeowner borrows against the equity in their home and receives periodic payments from the lender until the payments reach their pre-determined limit.
For example, in order to qualify for a Reverse Mortgage, a person usually has to be at least 62 years old and own their own residence. The specifications of the Reverse Mortgage depend in large part on the borrower’s age, the amount of the mortgage sought, the financial condition of the borrower, as well as the current interest rates. Borrowers have a choice as to how they receive their payments. They can get them in a lump sum, as a series of fixed payments or via a credit line they can drawn down on. When the Reverse Mortgage eventually becomes due, the lender then either gets paid back in a lump sum or they take possession of the property secured by the Reverse Mortgage.