Also known as a Home Equity Conversion Mortgage (HECM)a reverse mortgage,is a popular way older homeowners (62+) can convert part of equity in their homes into tax-free income without having to sell home, give up title, or take on a new monthly mortgage payments.

Before explaining a reverse mortgage, let's review features of a Standard Mortgage:

With a standard loan or mortgage, your income stream is used to 'qualify' for mortgage or loan. The lender will want to see that you have enough cash flow from your job and other sources of income in order to make payments.

By securing this loan or mortgage against your house, bank has extra security. After all, if you stop paying, they can take away your house.

As years go by and you continue to make payments, you will build up 'equity', which is difference between what your house is worth, and how much you owe on loan or mortgage What you owe will be continually reducing as you pay off principal.

A Reverse Mortgage ... Reverses The Process:

A reverse mortgage, in contrast, requires no proof of income, no credit checks etc.. You simply have to own home you are borrowing against.

The reason for this is that interest payments are 'rolled up' on reverse mortgage - i.e they are added to loan, and not repaid monthly.

Over time, of course, this starts to eat up your equity, because as each interest payment is added to loan, interest starts being charged on previous interest too!

Who Would Benefit From A Reverse Mortgage?

Older homeowners (62+), who struggle on limited pensions are usually living in properties that have soared in value in recent years. With reverse mortgages they can unlock some of value in their homes and remain in property at same time, thus enhancing their retirement years.

These reverse mortgages are becoming more popular with seniors.

Paying Back The Loan

There are NO monthly payments due on a reverse mortgage while it is outstanding. The mortgage/loan is repaid when homeowners cease to occupy home as a principal residence, whether homeowner (the last remaining spouse, in cases of couples) passes away, sells home, or permanently moves out.

Your credit report is nothing more then a very detailed snapshot of your financial history that is furnished to anyone supplying you credit from credit bureau. There are three main credit bureaus that handle a majority of these credit report request. They are Experian, Equifax and Trans Union. Each of these organizations are private in nature and routinely furnish your credit information when asked to do so for a fee.

Generally speaking credit reports provided by credit bureaus are very detailed and very accurate. For instance it’s not uncommon for them to have information regarding missed payments as far back as 6 or 7 years. They collect this information in order to provide it to creditors prior to their providing any form of credit to a consumer seeking credit. The creditors can use information they receive to determine if that same consumer can be considered a good credit risk. A good rating allows for more favorable credit terms while a poor rating essentially ends any chance for a consumer to obtain credit in first place.