Difference Between Reverse Mortgage and Home Equity Loan

  • "What is the difference between a reverse mortgage and a home equity loan.  This is a common reverse mortgage FAQ.  There are three main differences between a reverse mortgage and home equity loan.

    First, reverse mortgages have age requirements.  Actually, both have age requirements.  With a regular loan, mortgage, or home equity line of credit, you just have to be of legal age to sign a contract.  With a reverse mortgage loan, you have to be aged 62 and older.  However, there are some states that allow you to do a reverse mortgage at age 60 or 61.

    The second difference is that there is a strictor equity requirement.  With a home equity line of credit, you can often borrow 80, 90 or even 100% of the appraised value.  There has even been programs in the past that allow you to borrow 125% of your home's value (second mortgage called a 125).  With a reverse mortgage you can access anywhere from about 50% to 75% depending on your age.

    The third difference is that you don't have to make a monthly payment to the bank for as long as you live or for as long as you live in your home.  You still own the home just like with a regular mortgage, so you'll have to pay property taxes and maintain insurance.

    A reverse mortgage is all about saving money.  You may also want to check out these Money Management Tips for Seniors.