| A reverse mortgage (known as lifetime mortgage in | | | | and only mortgage on the property. |
| the United Kingdom) is a loan available to seniors (62 | | | | Requirements |
| and older in the United States), and is used to release | | | | To qualify for a reverse mortgage in the United States, |
| the home equity in the property as one lump sum or | | | | the borrower must be at least 62 years of age. There |
| multiple payments. | | | | are no minimum income or credit requirements, but |
| The homeowner's obligation to repay the loan is | | | | there are other requirements and homeowners should |
| deferred until the owner dies, the home is sold, or the | | | | make sure that they qualify for the loan before they |
| owner leaves (e.g., into aged care). A reverse | | | | invest significant time or money into the process. For |
| mortgage is analogous to an annuity where the | | | | most reverse mortgages, the money can be used for |
| principal and interest are paid with homeowner's equity. | | | | any purpose; however, the borrower must pay off any |
| In a conventional mortgage the homeowner makes a | | | | existing mortgage(s) with the proceeds from the |
| monthly amortized payment to the lender; after each | | | | reverse mortgage and, if needed, additional personal |
| payment the equity increases within his or her | | | | funds. |
| property, and typically after the end of the term (e.g., | | | | A pending bankruptcy which has not been finalized |
| 30 years) the mortgage has been paid in full and the | | | | may, however, slow the process. Some types of |
| property is released from the lender. | | | | dwellings do not qualify, while others (like mobile |
| In a reverse mortgage, the home owner makes no | | | | homes) have special requirements (such as being on |
| payments and all interest is added to the lien on the | | | | an approved permanent foundation and built after |
| property. If the owner receives monthly payments, or | | | | 1976) in order to be approved. Before borrowing, |
| a bulk payment of the available equity percentage for | | | | applicants must seek third party financial counseling |
| their age, then the debt on the property increases | | | | from a source which is approved by the Department |
| each month. | | | | of Housing and Urban Development (HUD). |
| If a property has increased in value after a reverse | | | | The counseling is a safeguard for the borrower and |
| mortgage is taken out, it is possible to acquire a | | | | his/her family, to make sure the borrower completely |
| second (or third) reverse mortgage over the increased | | | | understands what a reverse mortgage is and how |
| equity in the home. But in certain countries (including the | | | | one is obtained. |
| United States), a reverse mortgage must be the first | | | | |