ELI5: What is reverse mortgage and how it works?

Imagine you're a grown-up with a house you own completely. You've paid off your mortgage. Now, imagine you're getting a little older and need some extra money to, say, buy groceries or fix a leaky roof. A reverse mortgage is like borrowing money against your house, but you don't have to pay it back right away!

Here's how it works, like a backwards regular loan:

• Who it's for: It's usually for people 62 or older who own their home outright or have a very small mortgage left.
• Getting the money: Instead of you paying the bank every month, the bank pays you. They give you money in a few ways:

• No monthly payments (usually): You don't have to make monthly payments to the bank. The loan grows over time because interest is added to it.
• When it's paid back: The loan (plus interest and fees) has to be paid back when you sell the house, move out permanently, or pass away.
• Keeping the house: You still own the house! You have to keep paying your property taxes, homeowner's insurance, and keep the house in good repair. If you don't, the bank can take the house.
• Heirs: When the house is sold, the bank gets paid back. Any money left over goes to your heirs (like your children). Sometimes, the house is "underwater" – the loan is bigger than what the house is worth. In some cases, this debt isn't passed on to the heirs.