A reverse mortgage, like a traditional mortgage, is a loan made by a lender to a homeowner using the home as security or collateral.
With a traditional mortgage, the homeowner uses their income to pay down the debt over time. However, with a reverse mortgage the loan balance grows over time because the homeowner is not making monthly mortgage payments.
A reverse mortgage loan typically does not require repayment until the last homeowner has passed away or has moved out of the property. Consequently, life expectancy is a huge part of the calculation in regards to how much money the borrower will receive. In general, the older you are, the more equity you have in your home and the lower your mortgage loan balance; the more money you can expect from a reverse mortgage loan.