subject: Reverse Mortgages: Different From A Home Equity Loan [print this page] Reverse Mortgages: Different From A Home Equity Loan
A reverse mortgage is different from a home equity loan because with a home equity loan, you have to pay back the loan after a certain amount of time. Therefore, to get the loan, you have to go through a credit check and an income check. A reverse mortgage, however, does not have to be paid back because the home is the asset lenders will take to pay themselves back once the last homeowner of the home passes away or moves away. Therefore, neither a credit check nor an income check is necessary to get a reverse mortgage. You do, however, have to be at least 62 years of age to get a reverse mortgage because the idea is that you do not live longer than the term of the loan.
With reverse mortgages, if lenders do not get the full amount owned to them from selling the house after the last homeowner passes away or moves out, it is their loss. Assets from the house are safe and will not go toward making up for lost money to the lenders. Any extra money made from selling the house goes to the estate, the lenders do not keep it. But, just like with a home equity loan, however, there will still be interest collected by the lenders with a reverse mortgage, but the interest will be low.
Most all homes qualify for a reverse mortgage, but if you own a mobile home, it must not have been built more than 30 years ago, you must own the land it sits on, and it must have a foundation. If you own a townhouse or a condo, some of those may be eligible. With a home equity loan, whatever amount of equity you have in the home can be borrowed, much like with a reverse mortgage, the more your house is worth, the more money you can use. You cannot outlive a reverse mortgage term since the home cannot be sold until the last living homeowner either passes away or moves away.
