Take two minutes and hold on because this little reverse mortgage primer is packed with specific information, much of which clarifies misconceptions about reverse mortgages lenders.

What is a reverse mortgage?
A reverse mortgage gives you a lump sum, line of credit, or monthly cash payments based on the equity in your home and life expectancy. Reverse mortgage rates are similar to standard mortgage rates with standardized calculations that can be seen using a free online reverse mortgage calculator. The reverse mortgage proceeds go directly to you and can be used for any reason.

You do not have to make any payments on this money, settlement occurs when the youngest borrower who was age 62 or over at loan origination passes. When that occurs, the home is not lost, your heirs have a stipulated amount of time, usually 12 months, to refinance and keep the home or sell it to satisfy the loan balance, leaving your heirs with the remaining equity.

In other words, a reverse mortgage allows you to take from the home what you need, supplementing your personal income with money provided from a loan using the equity of your home, with this loan having the unique feature that you do not need to make payments on the money used, thus allowing it to serve as the perfect supplement, especially for those on a fixed income.

The key point that most do not understand is that this income supplement does not force you to surrender your home at a future date. Therefore you are using what you need and yet still leaving any remaining equity in the home that you did not use for your heirs.

This is critical to understand. The money you receive from the reverse mortgage, no matter how you receive it, is added to an increasing loan balance with an interest charge, with reverse mortgage rates fixed and low just as with regular mortgage rates, debited to the balance each month. At the end of the life of the youngest borrower, whatever is owed can be settled by their heirs who can keep the remaining equity. If it would help to see this in actual numbers, then it is simple using a loan calculator.

If you find you want to cancel the reverse mortgage mid term, you can simply pay off the balance owed. If you find you have extra cash each month and want to keep the reverse mortgage balance low given your extra cash, you can pay the money to the balance and the balance owed will decrease. As you can see, the reverse mortgage operates just like any other loan, except that payments are added to the balance each month in lieu of having a payment owed.

With that clarified, there is one unique feature should you choose the type of reverse mortgage loan that offers a lifetime monthly payment, not payments for a fixed term, where you and your spouse will receive cash each month for life. With this feature, even if the value of the home decreases and the sum of the loan far surpasses the value of the home, given this is a non-recourse loan, should that happen, the small insurance premium that is a part of the loan covers the outstanding balance and your heirs have $0.00 liability.

Hopefully this quick primer helps with understanding that a reverse mortgage is a financial tool and as with any financial tool it can be used in hundreds of ways, each unique to each persons situation and needs. The key being that the reverse mortgage is simply a loan without the burden of requiring payments from your current income. The reverse mortgage rates are the same as regular mortgage rates and the numbers are fixed, as can be seen using a reverse mortgage calculator. This standardization proves there are no tricks nor gimmicks, the entire process is very straight forward and contrary to popular belief, the reverse mortgage terms do not force the forfeiture of your home and your will be able to pass on the unused equity to your heirs.