A Question of Reverse Mortgages?

A question of Reverse Mortgages?

Why are Reverse Mortgages called reverse mortgages? While this may seem like a very simple question, the various answers one gets sometimes cause more confusion than necessary. So here is my definition of a Reverse Mortgage:

These mortgages work just the reverse of regular or "forward" mortgages. Under a traditional (or forward) mortgage, an individual borrows money to buy a house and makes periodic loan payments to a lender. Under a reverse mortgage, a homeowner borrows against the equity in their house and receives money from a lender. The financial results also are the reverse of a regular mortgage: with a regular mortgage your debt decreases and your home equity rises as loan payments are made; with a reverse mortgage, your debt increases and equity declines over the life of the loan.