A reverse amortization mortgage, a reverse annuity mortgage, and a reverse mortgage are all types of home equity loans. If a homeowner is 62 years or older and has a significant amount of equity in his home, a reverse mortgage may be a viable loan option. A traditional home loan requires the homeowner makes scheduled payments to the bank, but in a reverse mortgage the homeowner receives equity payments from the bank. A reverse mortgage is one option for an elderly person who may have a considerable amount of equity in a home but still requires a regular monthly source of income.

Reverse Mortgage Terms

When the homeowner applies for a reverse mortgage, the bank will grant them a loan for part of the equity in the home. While receiving equity payments from the bank, the homeowner can reside in the home. The terms of a reverse mortgage can be structured in different ways; thus, monthly payouts can continue for a pre-determined number of years or for the entirety of the homeowner’s life. The homeowner may also have the option to receive the equity payment in one lump sum. The reverse mortgage can take the form of a home equity line of credit where the bank is paid back with interest when the house is sold or when the homeowner dies. The lender can pay out more than the assessed or market value of the property if the homeowner chooses the monthly payment option. The heirs of the estate will have to pay the lending institution back for any payments made to the homeowner that exceeds the net sale of the home.

Take into consideration that the property owner will have to pay for maintenance, insurance and all taxes on the home. If a homeowner cannot fulfill those responsibilities, then he will have to repay the loan in full.