How Do Traditional Mortgages and A Reverse Mortgage Differ?

Clear up the confusion about reverse mortgages. Learn how they differ from traditional mortgages.

Seniors have spent the majority of their adult years paying off traditional mortgages. Under these plans, the homeowner has to pay a certain amount to the bank every month in order to keep the home. The loan is generally meant to take 30 years to pay off. Often, homeowners refinance the mortgage during difficult economic times, causing them to pay even more on their homes. Seniors who have finally paid off a mortgage are therefore reluctant to get into another one. However, many people are encouraged to take out a reverse mortgage once they reach the age of 62. What is a reverse mortgage, and how does it differ from the traditional mortgages people spend years paying?

REVERSE MORTGAGES ARE NOT DEBTS

Unlike traditional mortgages, a reverse mortgage is not an additional source of debt that must be paid every month. Instead, the homeowner is paid a certain amount of money every month she remains in the home. The money does not need to be paid back until the homeowner moves or passes away. In most cases, the obligation to repay falls upon the homeowner’s family after the homeowner’s death.

WHO QUALIFIES FOR REVERSE MORTGAGES?

Traditional mortgages require credit checks, income verification, and references to reassure the bank that the homeowner will not default on the loan. Reverse mortgages require only that the homeowner be over the age of 62, own his own home, and not owe money on a current mortgage.

WHAT HAPPENS IF YOU DEFAULT?

Traditional mortgages come with a lot of pressure. The homeowner must come up with the money to pay the mortgage every month or risk losing his home. Reverse mortgages are free of such pressure because the homeowner receives money rather than owing it. Theoretically, the homeowner’s heirs could lose the home if they do not pay the reverse mortgage after the homeowner’s death; however, most heirs resolve the debt by selling the home.

Related posts

1. When is the Reverse Mortgage Due and When Is It Payable?
2. Can I Use the Funds Received From a Reverse Mortgage Any Way I Choose?
3. Will I Still Continue to Own My Home If I Take Out a Reverse Mortgage?
4. What are the Different Types of Reverse Mortgages?
5. Do Both Homeowners Need to Be 62 in Order to Get a Reverse Mortgage?

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