The first part of the master thesis presents the history of the reverse mortgage and its origin and how it has found its roots in traditional mortgage. In addition an overview of the Croatian banking market and the significance of loans, particular housing mortgage loans, what is presented in the balance sheets of banks. In the following was given a definitions of reverse mortgage which are elaborated by different authors, and types and terms of use available to potentional users of reverse mortgage. After that, paper considers many ways of using reverse mortgage as well as the advantages and disadvantages of this innovative credit product. In the end, there are some examples from the world and countries where the reverse mortgage already exists or planned to be introduced due to demographic and economic situations. It is written about United States and Australia and finally examples from European Union. Special emphasis is placed on the potentional and development of reverse mortgage in the Republic of Croatia. It's important to remark that throughout the paper and especially in the fourth chapter the economic and demographic indicators are intertwined which are key to the introduction of reverse mortgage on a country's financial market. Conclusion emphasizes that the benefits of reverse mortgage are numerous and from standpoint of economic, financial, social and demographic indicators.