The Difference Between Home Loan and Reverse Home Loan

Differences

Duration of the loan

• The main difference between a home loan and a reverse mortgage is the duration of the loan. In a reverse mortgage, the borrower is responsible for paying all property taxes and insurance. They are also associated with high closing costs. You must remain in the house for at least a year to keep the loan. It can be extended up to 20 years, and the lender can sell the house if you don't make the payments on time.

Repayment

• This loan has some restrictions, such as a specified period after which you must repay the loan. However, in most cases, borrowers can cancel the loan at any time during that period. The lender must be notified in writing, so make copies of all communication. It also usually ends when the borrower dies or moves out of the home. When the borrower dies, heirs may decide to sell the house to repay the loan. As for traditional loan it must be paid off via monthly payments.

Although it gives the lender ownership of the home, the borrower still has to pay property taxes and insurance. And, of course, they must take care of basic maintenance and repairs of their property. It can be very risky, but it's worth it if you're comfortable paying the monthly fees. And, as with any loan, you should know all the risks and drawbacks.

Other than that it is a way for older homeowners to access their home equity for various purposes. You can get a lump sum of money or a line of credit from your home equity. This loan is the ideal choice if you don't have a regular source of income or reserve funds for emergencies. With this line of credit, you can add more funds as needed. If you need extra cash for a large debt or a major medical expense, this is the right option. You'll never have to worry about losing your home or losing it to foreclosure again.

The major differences between a reverse mortgage and a traditional home loan are the amount of money you can get, as well as the terms and conditions. While it is backed by the Federal Housing Administration, so you can be sure your lender won't default on your mortgage. Home equity conversion mortgages are federally insured, and only available through lenders approved to disburse FHA loans. The amount you can get will be based on the appraised value of your home. Some lenders may require two appraisals before approving the loan. The one with the lowest appraisal value will be used.