What is a reverse mortgage?

A reverse mortgage is specifically designed to assist older homeowners in converting their home equity into cash. This type of loan allows seniors, typically aged 62 or older, to borrow against the equity they have built up in their homes without the obligation to make monthly mortgage payments. The loan amount can be received as a lump sum, monthly payments, or a line of credit, thus providing financial support to individuals who may need funds to cover living expenses, healthcare costs, or other needs in retirement.

The key feature of reverse mortgages is that repayment is usually not required until the homeowner sells the home, moves out of the house, or passes away. This makes it a beneficial financial tool for seniors looking to tap into their home equity while still living in their home. In contrast, the other options involve different financial products or purposes that do not align with how reverse mortgages function, emphasizing why the focus on converting home equity into cash is crucial in understanding this financial concept.