Glossary
Reverse mortgage
A loan for homeowners 62+ that pays you from your home equity instead of the other way around — repaid when you sell, move out, or pass away.
A reverse mortgage flips a normal mortgage: instead of you paying the lender each month, the lender pays you — as a lump sum, monthly payments, or a line of credit — drawn against your home's equity. No monthly repayment is required while you live in the home as your primary residence, but interest accrues and the balance grows over time. The loan comes due, with interest, when you sell, move out permanently, or die, at which point the home (or your estate) settles the debt, usually by selling the property.
Related terms
- Subprime loan A loan made to a borrower with a low credit score, priced with a higher rate to offset the added default risk.
- Line of credit A revolving credit limit you can draw from, repay, and draw again — you pay interest only on what you actually use.
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Co-borrower A second person who shares ownership of what a loan financed and is equally responsible for repaying it from the start.
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- Lien A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.