In a reverse mortgage, what is the primary source of repayment?

In a reverse mortgage, the primary source of repayment is indeed derived from the sale of the home. This type of loan allows homeowners, typically seniors, to convert part of the equity in their home into cash without having to sell the home or make monthly mortgage payments. Instead, the loan amount, including accrued interest and fees, is repaid when the homeowner sells the home, moves out of the home, or passes away.

Once the home is sold, the proceeds from the sale are used to pay off the reverse mortgage. If any remaining equity exists after the loan is repaid, it is given to the homeowner or their heirs. This repayment mechanism makes the sale of the home the critical component in settling the debt associated with a reverse mortgage. Thus, understanding that the sale of the home is how the lender ultimately recoups their investment is essential in grasping the workings of reverse mortgages.