Even though reverse mortgages work like any loan, there are some differences. Before deciding on a reverse mortgage, a buyer should understand what they are and how they work. Just like any other mortgage the interest accrues monthly but instead of the amount of principal going down, it goes up. There is not a set term like a traditional mortgage, rather the time period depends on how long the borrower lives in the home. 
A reverse mortgage can have either a fixed rate or a variable interest rate. The difference is in how the borrower will receive payments and the amount they are allowed. A fixed-rate will stay the same for the life of the loan, and a variable rate will go up and down according to the rate index.
Fixed-rate reverse mortgage borrowers will be given the full amount at closing. A fixed rate is not as common as a variable rate when it comes to reverse mortgages. This is due to the fact that the borrowers will get less equity than they would with a variable rate.
On a variable rate, a borrower will be able to choose how and when they will receive funds. They can choose a lump sum, monthly payments, or a line of credit or they can choose all three.
As for interest, this does not need to be paid until the end of the loan, whereas with a traditional loan, it is paid with each monthly payment. This can be a little uncertain as a borrower will not know the exact amount of interest they will end up paying on the whole loan.
Some borrowers worry that the amount they owe will be too much for them to afford because of the interest and other fees accrued on the balance. Homeowners do not want the amount to be more than the home’s value. If this is the case then a Home Equity Conversion Mortgage.
Using a reverse mortgage will allow borrowers to skip over monthly payments and take advantage of an improved cash flow. This is a bonus for those with limited finances. Remember that with a reverse mortgage, you as the homeowner will still be responsible for paying insurance, property taxes, and other home expenses.
