What is a reverse mortgage?
Hardly a day passes without hearing an advertisement for a reverse mortgage, but while you may be familiar with the term, we doubt you’re familiar with what a reverse mortgage actually is.
Because we knew very little about reverse mortgages we decided to do a little research. This topic was especially important to us because it mostly affects senior citizens who may be confused about their options (heck, everyone is confused when it comes to mortgages!).
With a traditional mortgage, what’s really happening is the lender buys the house FOR you and you make payments to them on the principal and interest until you fully buy it. Even though the lender technically owns the home until you pay it off, you move in right away and live there.
With a reverse mortgage, the lender is buying the house FROM you and they make a payment every month to you. Also like a traditional mortgage, the lender keeps track of the interest on the balance they’ve paid to you, although they don’t pay you monthly interest (we’ll discuss this more in a moment).