A reverse mortgage is a loan available to senior citizens, 62 and over in the United States, and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves.
In a typical reverse mortgage the homeowner makes monthly amortized payments to the lender. And after each payment the equity on the property increases. Typically, the mortgage is paid in full after 30 years and the property is released from the lender.
In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month. If a property has increased in value after a reverse mortgage is taken out, it is possible to acquire a second of even a third reverse mortgage over the increased equity in the home. But in certain countries (including the United States), a reverse mortgage must be the first and only mortgage on the property.
Reverse Mortgage fees typically are only a disadvantage if the borrower intends on moving out of the house in a short amount of time. Even though reverse mortgage interest rates can be high, the fees and interest are not a burden to the homeowner since they are usually financed by the mortgage itself. Meaning that there are no out of pocket expenses.