Reverse Mortgage or Home Equity Loan?

Reverse Mortgage vs Home Equity



When talking with senior homeowners or their adult children, a common question is why not just get a home equity loan?  It’s important to understand the difference between a reverse mortgage and a home equity loan.


Here are some very important differences:




A homeowner requesting an equity loan will require conventional financing.  This relies heavily on having sufficient income to repay the loan and favorable credit.  A homeowner applying for a reverse mortgage does not have limitations based on income or credit, but they must be 62 years or older.  What both of the homeowners have in common is the need to have equity in their home that meets the minimum requirements of their lender.




Although both loan types accrue interest, the equity loan borrower will be required to make monthly loan payments until the principle is paid off, usually a 15-30 year term.  On the other hand, a reverse mortgage borrower will not be required to make any loan payments and instead, interest will accrue on the principle.  A reverse mortgage does not have a set term and the loan will continue until the borrower leaves the home for a period of 12 months or more, passes away, or repays the loan voluntarily.


Effect on Family


With a reverse mortgage, after the passing of a homeowner, the heirs will be responsible for determining what they want to see happen with the home.  Heirs are not able to “take-over” a reverse mortgage.  With a home equity loan, the principle would have been paid down over time and the equity would remain in the home for the heirs to do with as they wish according to the loan guidelines.


Overall, before making a decision one way or the other, it is important to understand the pros and cons of each loan type and work with a reputable lender to answer any questions you may have.


Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

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