In a nutshell, a reverse mortgage enables you to borrow a sum of money based on the amount of equity you have in your house. Equity is the portion of your house's value that you have paid for and, therefore, own. The loan is repaid when you die or when you move out of the house for good, using the proceeds from the sale of the house. If the loan balance is less than the value of the house, your heirs will get whatever is left after the loan is paid off. If the loan balance is greater than the value of the house, they have no obligation to give the lender anything but the house.
Reverse mortgages get complicated for a variety of reasons.
First, there are several ways to convert your equity into cash. You can also use a combination of these options, getting part of your equity in a lump sum and part in monthly payments. The other reason reverse mortgages appear complex is that the amount of equity you can tap will vary greatly depending on the type of loan you choose, the lender, your age and personal circumstances. Your age and circumstances matter because the loan generally isn't paid back until you die. Lenders try to calculate when that will be, so they won't lend you more money than your house will be worth when it's sold to pay your loan.