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Simple English definitions for legal terms
Reverse mortgage
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A quick definition of Reverse mortgage:
Reverse mortgage: A type of loan for homeowners who are at least 62 years old and own their home. The loan allows them to receive money based on the equity in their home, but they don't have to pay it back until they die, sell the house, or move. To qualify, they must meet certain conditions set by the FHA.
A more thorough explanation:
A reverse mortgage is a type of loan that allows homeowners to receive money in exchange for the equity in their homes. Unlike traditional mortgages, the loan does not have to be repaid until the homeowner dies, sells the house, or moves out.
To qualify for a reverse mortgage under the FHA's program, homeowners must be at least 62 years old, own the property outright or have a small mortgage, and meet other conditions.
John is a 70-year-old homeowner who has paid off his mortgage. He wants to supplement his retirement income, so he applies for a reverse mortgage. The lender agrees to give him a loan based on the equity in his home. John can use the money for any purpose he chooses, and he does not have to make any payments until he moves out or passes away.
This example illustrates how a reverse mortgage can provide financial flexibility for older homeowners who have built up equity in their homes. By tapping into that equity, they can receive a lump sum or regular payments to help cover expenses or improve their quality of life.