Traditional vs. Reverse Mortgage
What is a traditional mortgage? This is a type of loan where the lender will lend you the funds to buy a new home. In exchange, you agree to pay the lender back any money you borrowed, along with interest, over an extended period of time.
What is a reverse mortgage? This type of loan allows you to access a portion of your equity that had been built up in your home to be obtained without having a monthly mortgage payment. The existing mortgage balance will be paid off during the process of a reverse mortgage loan. You must be at least 62 years or older to apply for this loan.
So, what home loan is right for you?
A traditional refinance makes more sense for those that:
- Don’t plan on living in this home long term.
- Have sufficient retirement funds and won’t be supplementing your retirement income.
- Are not 62 years of age or older.
- Are not struggling to make your monthly mortgage payments.
A reverse mortgage loan makes more sense for those that:
- Plan to stay in your home long term.
- Are looking to supplement your retirement income and could benefit from no monthly mortgage payments.
- Are 62 years of age or older.
- Want to plan ahead for a rainy day and obtain a line of credit for unexpected expenses.