Difference between a home equity line of credit and a reverse mortgage
How they are similar yet different and are meant for different uses
There are a lot of similarities as well as differences between what a reverse mortgage loan is and what a home equity loan or otherwise known as a home equity line of credit is. For the most part everything is simply explained and can be easily compared and contrasted but the main difference between the two is that one is where you pay the lender and the other is where the lender pays you.
More specifically a home equity loan is a kind of loan in which the borrower uses the equity, or what the house is worth as collateral for the ability to get the loan and they are more often than not used to help pay the costs of expenses for home repairs, add-ons, college, medical and more. Whereas a reverse mortgage is a loan for a home in which is where cash payments are made each month to the owner of the home based on the equity of the house and they do not have to make a payment on this loan until they sell that house, move out of the house or pass away.
More people go with reverse mortgages because in the end they cost less and they are way more helpful than home equity loans. But people that do choose to go with a home equity loan more than likely really need the help and or are not at least sixty two years of age or older which is how old you have to be in order to even apply for a reverse mortgage loan. The thing that most people do not like about home equity loans is how you have to make a monthly payment on it and that one thing is exactly what a reverse mortgage loan does not make you do. With a reverse mortgage loan you do not have to make a monthly payment, instead you receive a monthly payment but you do have to still pay your taxes for the property, whatever your utilities are as well as any insurance premiums you have; such as a hazard insurance premium or a flood insurance premium.
Both do base the amount of the loan that you can get on several different factors and each has their own set maximum amount that can be lent. Just keep in mind that when you are borrowing if there is more than one borrower listed they use the age of the youngest borrower listed to determine the actual amount of money that you can borrow up to. In some situations this is a very good thing but in other situations this factor can be something that is more negative than positive. And just like how there are different kinds of loans and how there are so many factors that determine who get is and who gets what there are also different ways in which you can receive your money so during the whole process of applying you need to determine which method would be best for you and your family.