The easiest way to see a reverse mortgage is as a Loan. Someone who owns a home and is over 62 years of age, and has enormous home equity can borrow against the value of their home, and receive vast amounts of money, fixed monthly checkouts, or a line of credit. Unlike a traditional mortgage, where you are required to make loan payments— a reverse mortgage doesn’t require the homeowner to pay any loan payments.

The entire loan balance only becomes payable when the homeowner either dies, moves away permanently, or decides to sell the house. Lenders must make sure that the total amount of the loan does not exceed the value of the house. In case it ever does the federal regulations dictate that the state will not be responsible for covering the amount that exceeds the value of the house. This could either happen if the borrower lives a long and healthy life, or if there is a sudden dip in the price of the home in the market.