Instead of the borrower making payments to the lender, the lender makes payments to the borrower in the form of:
- a lump sum
- monthly payments
- a line of credit
- or a combination of these options
The loan is usually repaid when the homeowner:
- sells the home
- moves out permanently
- or passes away
At that point, the home is typically sold, and the proceeds are used to repay the loan balance. Any remaining equity goes to the homeowner or their heirs.
Reverse mortgages are commonly used by retirees to supplement income, cover healthcare costs, or improve cash flow while continuing to live in their home.
