A "reverse" mortgage is a loan that you do not have to pay back for as long as you live in your house. This loan uses your house as collateral to guarantee the loan. It turns the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

• in a single lump sum of cash
• as a regular monthly cash advance
• as a "creditline" account that lets you decide when and how much of your available cash is paid to you
• as a combination of the above payment methods

No matter how you receive the cash with this type of loan, you typically don't pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

With typical mortgage loans, you can lose your house if you don't make your monthly payments. With a reverse mortgage, there aren't any monthly repayments to make, so you can't lose your house. Most reverse mortgages require no repayment for as long as you live in the house.

It's similar to a regular mortgage
You can see how a reverse mortgage works by comparing it to a regular mortgage. Both types of mortgages create debt against your house, and both affect how much equity you have in your house, but they do so in opposite ways. With a regular mortgage, you make a payment and the equity in your house is increased because you owe less. With a reverse mortgage, you receive a payment and the equity in your house is decreased. Of course, if property values increase over time, this could help offset the decrease from the reverse mortgage, or allow you to borrow even more when needed.

For more information, consider the following links from the AARP website:

• Basic loan features
• Loan types and costs
• Other choices