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The definition of a reverse mortgage is that it turns the equity of the home into cash. A reverse mortgage can be seen as a loan advance, it works as loan, but in reverse.
The home owner sells the property, but the owner can stay in the property. The cash from the sale is usually paid to the seller over time, much like a pension scheme. When the seller moves out or dies, the property goes to the buyer.
That is all for the definition, what about a real graphical example? Open the Wealth Manager and drag and drop a property to be purchased by yourself in the near future.
If you hold on to the property beyond your retirement age, you will most probably see that you will end up with negative cash. However, you own an asset that has a large value, see the figure below.
This is the typical 'asset-rich, cash-poor' problem that many citizens face when growing old. A reverse mortgage or sale and leaseback program allows you to unlock the value of your home into cash.
Using the Wealth Manager, set the sale date of the property to a reasonable age before you run out of cash, you will immediately see that you have unlocked a great portion of cash! And moreover, by using this scheme, you do not need to move out of your home sweet home, you can still benefit from it !
Your cash position will be greatly improved, as you can see in the figure below.
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