The name “reverse mortgage” is meant to contrast these loans with the traditional “forward mortgage”. There are several reverse aspects to these loans:

1. First, the monthly payment relationship between lender and borrower is reversed. With a conventional loan, the borrower (you) makes monthly payments to the bank or other lender. With a reverse mortgage, in contrast, the bank makes monthly payments to you.

2. Second, with a conventional mortgage you pay off the debt over the term of the loan. As you make payments, your debt decreases and your home equity increases. With a reverse mortgage, the reverse occurs: your debt increases and your home equity decreases.

One thing that is the same with both forward and reverse mortgages is the effect of interest rates. With both mortgage types, lower interest rates mean you are able to borrow more and higher interest rates restrict the loan amount.

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