The first thing to understand about the basics of a reverse mortgage is to define what it is. A mortgage is a loan you take to buy a home. The reverse mortgage is also a loan. The difference is that it is a loan taken on the home that you own. It is a loan given based on the value of a home.

In a regular mortgage, you take a loan to buy a home and then repay it every month until the loan is cleared. The reverse mortgage is a loan you get on your home value. You do not need to repay this loan. The amount is not due for repayment unless the person who took the loan moves out of the home, sells it, or dies.

Considering the type of loan that a reverse mortgage envisages, it is given only to those who are over the age of 62. This is because the term of a reverse mortgage is until the death of the homeowner. When the homeowner dies, then the heirs need to repay the loan.

Why take a reverse mortgage?
Reverse mortgage is a good option for the aged who have no source of income. People over 62 who have a home and need money can opt for a reverse mortgage to get a fixed sum of money. They can even opt to get this money paid every month instead of a lump sum payment.

This will be helpful in getting money for monthly expenses. Unlike regular mortgages, interest need not be paid immediately. Instead, the interest accumulates and is added to the loan amount. Effectively, the person taking the mortgage need not pay anything.

Facts you need to know
You need to be aware of certain facts about reverse mortgage so you would understand whether it is of any use for you to meet your needs.

• In a regular mortgage, the money to be repaid decreases. However, in a reverse mortgage, the amount to be repaid increases. Your debt is increasing monthly as interest is accumulating for the loan you took on your home.
• You must be aware that the interest is compounded.
• Apart from interest, there are other charges. Monthly charges for servicing can be up to $35 every month. Of course, these charges need not be paid but will keep accumulating.
• The lending agency will take care to ensure that the amount due is less than the home value. This is so that they can sell the home to recover the loan. This is why the reverse mortgage you get will be lesser than the actual value of the home.