Regular Mortgage versus Reverse Mortgage: A Comparative Study

A regular mortgage refers to that mortgage loan which you take in order to buy a home of your own. But, the reverse mortgage is the loan which you take by cashing out the equity locked up in your home. Reverse mortgage dose not hold the exact opposite meaning of regular mortgage, though the term implies so.

In order to find the actual differences between regular mortgage and reverse mortgage, you can check out the following points:

  • An individual can apply for a regular mortgage loan irrespective of his age. But, for getting a reverse mortgage loan, you have to be at least 62 years of age.
  • In case of a regular mortgage loan, you require to make a downpayment for getting the loan advance. After receiving the loan amount, you start making monthly payments for repaying the loan. But, in case of reverse mortgage loan, you are not required to repay the loan, until you sell your home or move to another house or pass away.
  • The purpose of taking a regular mortgage loan is always buying a real estate property. But, in case of reverse mortgage loan, you can use the loan amount for any purpose.
  • Your credit report can influence your regular mortgage loan. In fact, the interest rate that you will be paying for the mortgage loan is determined on the basis of your credit score. But, for getting a reverse mortgage loan you so not require an impressive credit report.
  • In case of a regular mortgage loan, you always carry the risk of foreclosure if you miss your monthly payments. You can even lose your home if you become unable to repay the loan. But, in case of reverse mortgage loan there is no chance of losing the roof over your head.
  • Once, you repay the regular mortgage loan, the mortgaged home is returned back to you and after your death it naturally becomes a possession of your heirs. But, in case of reverse mortgage loan, after your death, your home is not passed on to your heirs. They can own it by repaying the loan amount charged by the reverse mortgage lender.
  • In case of regular mortgage loan, you start with zero equity and 100% debt and as you make payments every month, gradually, your debt amount decreases and home equity rises. On the contrary, in case of a reverse mortgage loan, you begin with zero debt and 100% home equity and with the passing time, your debt burden rises with a falling home equity.

This article is written by mortgagespecialist, a member of mortgagefit.com. She has been writing on different mortgage related topics like refinancing, second mortgage, foreclosures, etc.

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2 Responses to “Regular Mortgage versus Reverse Mortgage: A Comparative Study”

  1. Deborah |  Dec 19, 2008 at 10:56 pm

    I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Deborah

  2. TS |  Jan 08, 2010 at 10:26 pm

    I think your last bullet simplifies the issue a little bit. You don’t necessarily start with zero equity with a forward, nor do you necessarily start with zero debt with a reverse. The references it increasing and decreasing equity would have been enough without going further. Good article though.