Saving, Managing Debt, and Budgeting

Home Equity

What is a “reverse mortgage”?

A reverse mortgage is a financial product for people aged 62 and older with significant home equity. The homeowner may be able to pull out this equity in the form of a mortgage, whereby the bank actually pays the homeowner a lump sum, monthly checks, or a line of credit for the amount of equity the homeowner wishes to receive. There are significant fees in order to do this, usually 10% of the home’s value. It allows a retiree to pull out equity in his home without having to incur a home equity loan, allowing him to receive additional income. The reverse mortgage is then paid off when the home is finally sold. The reverse mortgage also incurs interest fees, which are paid back when the home is sold.


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