What's the Difference between a Reverse Mortgage and a Home Equity Loan?
With a home equity loan or line of credit, a homeowner must have sufficient income, when compared to debt, to qualify for the loan, and is required to make monthly mortgage payments. Each monthly payment reduces the amount of principal that the borrower owes on the mortgage and increases the equity value in the home.
A reverse mortgage is different in that it is available regardless of current income. Repayments do not have to be made, because the loan is not due as long as the borrower lives in the house as his or her principal residence. With a reverse mortgage, the home is mortgaged to the lender. Each payment received from the lender increases the amount of principal and interest that the borrower owes on the mortgage and reduces the equity value in the home. Like all homeowners, real estate taxes and other conventional payments like utilities, must still be made. However, with a reverse mortgage, a borrower cannot be foreclosed or forced to vacate his or her home because of a missed mortgage payment as with a home equity loan.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA (Opens in a new Window)/SIPC (Opens in a new Window). UniVest Financial Services is a trade name of UniBank. Infinex and UniBank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.