A reverse mortgage is a special type of home equity loan that is sold to homeowners who are 62 years old or above. While the loan allows homeowners access to a part of their home equity as cash, if the loan is not repaid when the homeowner sells the home, moves out of the home, or dies, then the homeowner loses ownership of the home.
With a reverse mortgage, you are borrowing against your equity, while the loan balance grows over time. Keep in mind that you must remain in your home if you have a reverse mortgage, otherwise the loan becomes due. They are compounding loans with very high interest rates.
CANHR provides a factsheet including questions to ask yourself if a reverse mortgage is your best course of action. A consideration to keep in mind is that if you have heirs and they do not have enough to pay the loan when it becomes due, the home will go into foreclosure. Another important consideration is that this loan may impact your continued eligibility for government assistance programs. Additionally, there are ongoing financial obligations. If you fail to pay property taxes, insurance or maintain the property then the loan can go into default and the home can go into foreclosure.