A loan for homeowners 62 or older that converts home equity into cash, with no monthly payments required — the loan is repaid when the home is sold.
Full Definition
A reverse mortgage allows homeowners 62+ to convert part of their home equity into tax-free loan proceeds without selling the home or making monthly mortgage payments. The most common type is the FHA-insured HECM (Home Equity Conversion Mortgage). The loan balance grows over time as interest accrues. Repayment is triggered when the last borrower moves out, sells the home, or passes away. At that point, heirs can repay the loan and keep the home or sell the home to pay off the balance. Reverse mortgages are complex and involve significant fees — they're most suitable for borrowers who plan to stay in the home long-term and need to supplement retirement income.
Related Terms
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