If my understanding of a mortgage is accurate, in that you (for lack of a better word) sell your house to the bank and buy it back, in monthly payments, then a reverse mortgage would be the bank slowly buying your house out from under you. Ive heard it described as a scam to get the old and financially illiterate people out of their homes so the bank can resale the house at a profit. I have to assume I misunderstood some part of this cuz none of that seems like it should be legal.
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In a mortgage, you pay the bank monthly, then at the end you own the house.
In a reverse mortgage, the bank pays you monthly, then at the end the bank owns the house. You’re basically selling the house in slow motion.
Banks like them because they assume that housing prices will go up, so they’ll be able to sell the house for much more than it cost them. Older people like them because it gives them an additional and reliable stream of income “for nothing”, and they’re planning it out with the assumption that they’ll pass away before the reverse mortgage is finished.
The downside is that a house represents a massive amount of wealth, and it can no longer be passed down to children.
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