What Is a Reverse Mortgage?

A reverse mortgage is a financial agreement in which a homeowner abdicates equity in their home in return for payment. This is a tool designed to be utilized by older individuals in order to supplement their retirement income. With a reverse mortgage agreement, the bank pays the homeowner based on the percentage of accumulated equity they have in the home. This amount has to be repaid either when the homeowner dies, sells the home, or moves out permanently. To be eligible for a reverse mortgage, you must either own your home outright or have a low mortgage balance. Additionally, there are no restrictions dictating how the money received from a reverse mortgage can be used by the homeowner.