Mortgage that lets an older homeowner draw on home equity without a standard monthly repayment obligation while occupancy rules are still met.
A reverse mortgage is a mortgage that lets an eligible homeowner convert part of home equity into loan proceeds without making a standard monthly principal-and-interest payment while the borrower still occupies the property under the loan terms.
Reverse mortgages matter because they turn illiquid housing wealth into spendable cash flow, a credit line, or a lump sum. That can support retirement funding, but it also increases the loan balance over time and reduces the equity left for later sale proceeds or heirs.
Instead of the borrower paying the lender each month as in a forward mortgage, the lender advances funds or makes part of the home equity available to the borrower. The balance usually grows as draws, interest, insurance charges, and fees accumulate.
Repayment is generally triggered when the borrower permanently leaves the home, sells it, or dies.
| Product | Payment direction while occupied | Typical use case | Main repayment trigger |
| — | — | — | — |
| Forward mortgage | Borrower pays lender | Purchase or refinance a home | Monthly repayment from the start |
| Reverse mortgage | Lender advances funds to borrower | Turn home equity into retirement liquidity | Sale, death, or permanent move-out |
| Home equity loan | Borrower pays lender | Borrow against existing equity for cash needs | Monthly repayment from the start |
Common reverse-mortgage structures include FHA-insured programs such as Home Equity Conversion Mortgage, proprietary reverse mortgages for higher-value homes, and some narrower public or nonprofit programs.