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For many Americans reaching the retirement age, the equity build up in their home is their only real asset. Reverse mortgage is a way to tap into this asset and create a stream of income needed for retirement or take care of an unexpected financial need that is usually related to health care costs in the elderly.
Reverse mortgage is not like a refinance, equity loan or a second loan on your home and there are some pitfalls.
So what is a reverse mortgage?
As the term implies the flow of money is reversed. Instead of the homeowner paying the lender on a predetermined schedule, the lender pays the homeowner and there aren't any payments due until the home owner moves or dies.
How did reverse mortgage start?
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The history of reverse mortgage can be traced to Nelson Haynes of Deering Savings & Loan (Portland, ME) who made the first reverse mortgage loan to Nellie Young, the widow of his high school football coach. This event was reported to be motivated by kindness and started a chain of events over the following forty years to extend a helping hand to today's retirees.