When it comes to comparing reverse mortgages to traditional mortgages, there are many similarities and differences. It isn’t a matter of which one is better; it’s a matter of which one is right for you.
How is a Reverse Mortgage Similar to a Traditional Mortgage?
A reverse mortgage is more similar to a traditional mortgage than you may think. For one, both are loans that allow you to borrow money based on the equity in your home. With both loans, you are also the owner of your home and your name is on the title. Because you are the owner, you are responsible for paying your property taxes and homeowners insurance and maintaining the property to avoid foreclosure. If you want to move out of the home or pay the loan off early, there are no prepayment penalties.
You may be looking for variety when it comes to your mortgage product. Both loans have this. Just like a traditional mortgage, the reverse mortgage can be government-insured (HECM) or not. Both loans also provide mortgage products with fixed or adjustable rates.
How is a Reverse Mortgage Different from a Traditional Mortgage?
While there are many similarities between the two loans, the reverse mortgage has a few additional features. The biggest difference between a traditional and reverse mortgage is that there are no monthly payments required on the reverse mortgage. You can pay as little or as much as you want when you want. The reverse mortgage actually pays off the traditional mortgage first, and you can use the remaining proceeds however you want. And when it comes to receiving that money, you have a few options. Depending on which reverse mortgage product you choose, you may receive your proceeds in one lump sum, monthly distributions, a line of credit, or any combination of the three.
There are also a few protections the reverse mortgage affords. No matter what government-insured reverse mortgage product you choose, you have protection against declining home values because the reverse is a non-recourse loan. That means you will never owe more than your home is worth. If the home sells for less than what is owed on the loan, FHA insurance will pay the difference, not you and not your heirs. This can be a comforting benefit of the reverse mortgage for those who worry about what will happen if their home goes underwater. With a government-insured reverse mortgage, it won’t. In fact, if you get a reverse mortgage line of credit, your available funds will actually grow in value over time, despite housing market conditions.
Which Loan is Right for You?
While it’s no surprise that we will usually recommend the reverse mortgage, we understand if the loan is not right for you. Choosing your loan will depend on your financial goals, what you want to do with the loan, and a few qualifying factors. In order to get a reverse mortgage, you must be a homeowner who is 62 or older. You must also have enough equity in your home.
We recommend speaking to a financial advisor to help you decide which loan is right for you.
Getting a Traditional Mortgage
If you are under 62 or are looking to go the more traditional route, we have an amazing mortgage team over at Quick Loans, our sister company. Their mortgage team will work with you to find the best financial solution based on your needs.
Getting a Reverse Mortgage
If you are a homeowner who is 62 or older and looking to get a reverse mortgage, you’re in the right place. One Reverse Mortgage has an A+ rating with the Better Business Bureau and a 9+ out of 10 client satisfaction rating on TrustPilot, a third-party reviews site. Our licensed specialists will provide a free mortgage review with no obligation to move forward. They’ll talk to you about your financial goals and help you choose the right reverse mortgage product.