Many home buyers do not understand a reverse mortgage. This type of mortgage is for seniors to help them when they are on a fixed income. The reverse mortgage got a bad reputation for the 1st few years it was available but has since been highly regulated and offers a senior great flexibility with their mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. The mortgage requires the senior to have a large equity in their home or put a large amount down. Usually, owing about 50% of what the home is worth best fits the reverse program.
In this type of mortgage, the monthly payment interest can be added to the loan balance and no payment made. Or, and greatly mis-understood is the senior can make any amount of monthly payment they wish. They can make extra payments or pay off the loan at any time. If the senior wants to travel for an extended time there is no requirement of there making the payment on time. If they have something come up they can skip a payment. Maybe a grandchild needs a car for school, or the home needs some repair. It gives maximum flexibility.
Yes, the senior misses a payment and the amount of the loan increase. Many seniors who do not understand the reverse mortgage think at some point when the loan amount exceeds the homes value they will be left without a home. Wrong. The home is theirs for as long as they are alive. But beware, a reverse mortgage can use up the equity in your home, which means fewer assets for you and your heirs. If you do decide to look for one, review the different types of reverse mortgages, and comparison shop before you decide on a certain company.