A reverse mortgage allows homeowners, usually those 62 or older, to borrow money using their home as security for the loan. The title for the home remains in the name of the person taking out the reverse mortgage. The reverse mortgage is repaid when the person taking it out vacates the residence of the home. Homeowners taking out this kind of mortgage must pay property taxes and insurance, use the house as their principal residence, and keep the house in good condition.
Under a reverse mortgage, the amount of money the homeowner owes to the lender goes up over time. Interest and fees are added to the loan balance each month.
With most reverse mortgages, the homeowner has a three day right to cancel the reverse mortgage for any reason and without penalty after the deal’s completion. This is known as the right of rescission.
See also: https://www.hud.gov/program_offices/housing/sfh/hecm/hecmhome
[Last updated in May of 2024 by the Wex Definitions Team]
Reverse Mortgages for Seniors (U.S. Department of Housing & Urban Development)
https://www.hud.gov/program_offices/housing/sfh/hecm/hecmhome