What occurs with a reverse mortgage in relation to a homestead?

A reverse mortgage is a financial product designed primarily for homeowners, typically seniors, that allows them to convert part of their home equity into cash without having to sell their home. When a reverse mortgage is taken out, it establishes a loan that is secured by the home itself, which adds a lien to the property. This means that while the homeowner continues to live in the home, the lender has a legal claim against the property based on the amount borrowed.

Typically, homeowners are not required to make monthly mortgage payments on a reverse mortgage; instead, the loan balance—including interest and fees—grows over time, potentially affecting the equity they have in the home. However, it is important to note that the debt does not have to be repaid until the homeowner moves out or passes away. Therefore, the establishment of a lien that comes with a reverse mortgage is a critical aspect of how this financial arrangement operates within the confines of property ownership and homestead laws.

Other options do relate to aspects of reverse mortgages, but they do not encapsulate the primary legal and financial implication as effectively as the addition of the lien.