A Reverse Mortgage is named so, because the stream of payment here is “reverse” of what is the normal flow. Normally, in a Regular Mortgage, you are the one making monthly payments to the lender, while, in Reverse Mortgage a lender makes payment to you. When you make a conditional pledge of your property to the creditor as security for the payment of a debt which you agree to repay on a monthly basis for a defined span of time at fixed or adjustable interest rate, then it is known as a Regular or Typical mortgage.

In a reverse mortgage, without having to sell the home, older homeowners, those above the age of 62 years, are able to convert a portion of the equity in their homes, into tax-free income. It is granted on the basis of the age of the borrower, expected property rate, interest rate and the current value of the property, and the amount owed by the borrower can never exceed the current value of your home. But before availing a reverse mortgage, a borrower should first pay off all his previous debts, or he can also do so with the money he obtains from the Reverse Mortgage.

The loan is repayable only when the property is sold, or if the last remaining spouse passes away or if the owners move out permanently. In the last case, if the owners move out and the sales proceeds of the house exceed the amount owed by the homeowners on the reverse mortgage, then the excess money goes to them.

Many people are attached to their homes as they may have stayed there almost all their life and may also have raised a family there, making it emotionally difficult for them to sell it. But with a reverse mortgage, a borrower still remains the owner of his/her property. In fact, he/she is also responsible for paying the property taxes and for conducting home repairs and insurance. The added advantage of opting for a Reverse Mortgage is that the amount received as loan is not taken as an income and is therefore not charged with any taxes.
In a reverse mortgage, borrower can receive cash either in one single payment or regular monthly cash advances. The amount of a reverse mortgage is dependent on a number of factors like age, the assessed value of the home, interest rates and the equity in the home.

For people who are above the age of 62 and live in and own their home, reverse mortgage options are of great benefit, especially when they can avail an opportunity of residing in their own home, in spite of mortgaging it. The option of receiving a tax free income also makes Reverse Mortgage, a lucrative deal.

Having chosen a Reverse Mortgage scheme, the borrower can then use the money for almost anything, the most common uses being the repairing or modifying your home; paying off existing; supplementing retirement income to cover daily living expenses; paying property taxes; debts covering health care expenses and taking a vacation.