How does a Reverse Mortgage differ from a conventional mortgage?
Under a conventional mortgage, you borrow funds from a lender to purchase a property, then make regular “principal and interest” repayments to the lender. Over time, the loan balance reduces and eventually you repay the loan in full and own the property outright.
With a reverse mortgage, the process operates in reverse. Seniors generally own their property outright to begin with and a lender advances you funds for your personal use. As you are not required to make any repayments, interest and fees are added to the loan balance each month, so the loan balance increases over time. The loan is paid out when the property is sold or refinanced by beneficiaries.
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