A mortgage that is collateralized with a mortgagor‘s home equity, while a mortgagee (a lender/ lending institution) makes regular payment (e.g., monthly) to the home-owner (the mortgagor) as part of the principal amount of the loan. The mortgagor can use the amounts received to finance specific requirements. The cumulative amounts constitute a loan against the value of the home equity, and as such, it is tax-free (being a debt).
This type of loans allow people (e.g., the elderly) with limited financial resources to tap into their home-equity without having to sell or let their homes. However, it may expose mortgagors to a great deal of risk: potentially, equity in estates can be depleted over the term of the loan. Moreover, the fees and interest rates tend to be higher than usual, and the loan, in specific situations, may need to be refinanced or repaid over a certain number of years- otherwise the real estate equity would be at the disposal of a mortgagee (for recovery of the loan).
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