What Is a Reverse Mortgage? In a word, a reverse mortgage is a loan. A homeowner who is 62 or older and has 50% or more home equity can borrow against the value of their home and receive funds as a lump sum, fixed monthly payment or line of credit. Unlike a forward mortgage—the type used to buy a home—a reverse mortgage doesn’t require the homeowner to make any loan payments, however it require the borrower pay their taxes and insurance.
Instead, the entire loan balance becomes due and payable when the borrower dies, moves away permanently or sells the home. Federal regulations require lenders to structure the transaction, so the loan amount doesn’t exceed the home’s value. The borrower or borrower’s estate won’t be held responsible for paying the difference if the loan balance does become larger than the home’s value. This is also known as a non-recourse loan.