What occurs during a reverse mortgage?

During a reverse mortgage, the homeowner receives money from the lender. This financial product enables older homeowners to convert part of the equity in their homes into cash, which can be used for various expenses such as healthcare, home improvements, or daily living costs.

In a typical reverse mortgage agreement, instead of making monthly payments to the bank, the lender makes payments to the homeowner based on the equity of the home. The loan amount increases over time as interest accrues, and the homeowner is not required to pay back the loan until they sell the home, move out of the home, or pass away. This option is particularly appealing to retirees who wish to access their home equity without the burden of monthly payments or selling their property.

The other options, such as making monthly payments to the bank, selling the property, or refinancing, do not accurately describe the nature of a reverse mortgage and how it functions in the context of home equity conversion for seniors.