Author:
Jessica Bennet
Community Mentor

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Reverse mortgage – How it differs from traditional mortgages

Whether it's a reverse mortgage or any traditional mortgage, both allows you to remain the owner of your home and require you to pay off the loan with interest. The difference lies in the way you pay them off.

When you're paying down a traditional mortgage, you do so by making payments on a monthly basis, which help you reduce your debt and build up equity. But reverse mortgages don't require you to pay in installments. Here the entire loan amount along with interest is paid back when the loan period ends or prior to that under certain conditions. Know more on when and how to pay off reverse mortgages .

Here's a list of differences to help you with the pros and cons of forward and reverse mortgages.

	Forward Mortgage	Reverse Mortgage
Purpose of loan	To purchase property	To generate cash.
Prior to closing, borrower has	No equity in the property	A lot of equity in the property.
At closing, borrower	Owes more and has less equity.	Owes less and has sufficient equity.
During the loan period, borrower	Pays monthly installments to the lender. Loan balance reduces. Equity increases.	Receives monthly payments from the lender. Loan balance increases. Equity gets reduced.
At the end of the loan period, borrower	Owes nothing Has sufficient equity.	Owes a large amount. Has much less equity.
Type of transaction	Falling debt, rising equity.	Rising Debt, falling equity.

Reverse Mortgages - How seniors tap equity for extra cash

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Rhonda

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0.10 Dollars($)

Posted: Wed Feb 08, 2006 1:12 pm Post subject:

In a forward mortgage the debt is used to turn your income into equity whereas in a reverse mortgage the debt is used is used to turn the existing equity into income. Thanks, Rhonda

boobie479

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0.10 Dollars($)

Posted: Wed Apr 26, 2006 6:44 pm Post subject:

I was told there was a cap on how much money I could receive on a reverse mortgage....That the cap on value of a home is $297,400 even if my home has been appraised for a higher value. Is this true? _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant

Samantha

Community Mentor

Joined: 16 Sep 2005
Posts: 1539
Location: MASSACHUSETTS

137.28 Dollars($)

Posted: Thu Apr 27, 2006 10:04 am Post subject:

Hi Boobie, Welcome to MortgageFit Forums. This is true that there are limitations on the value of your home that can be accessed through a reverse mortgage program. This depends on the location of your house. In Chicago, the cap on equity that you can withdraw via FHA-insured reverse mortgage is $237,500. Fannie Mae has a different Home-Keeper reverse mortgage where the cap is slightly higher. Check with some other brokers/lenders in your area to verify the cap value in your area given for your house. Feel free to ask if you have any more queries. God bless you. For MortgageFit, Samantha

jyoti

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0.10 Dollars($)

Posted: Sat Aug 18, 2007 12:52 am Post subject: want to know what is the investment amount

regarding the reverse mortgage i want to know that should we first buy a flat and r you going to give the rent instead.

Shina

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0.10 Dollars($)

Posted: Sat Aug 18, 2007 2:58 am Post subject:

Hi Jyoti, Which rent are you talking about? The mortagge community does not provide any rent facility. If you can properly specify your question, i'll be able to answer you.

Andrew

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0.10 Dollars($)

Posted: Wed Sep 10, 2008 3:05 pm Post subject: reverse mortgage

I have a coop in NYC valued at around 130 K. Can I get a reverse mortgage on a coop and if so for how much?

Caron

Moderator

Joined: 19 Jul 2005
Posts: 1482
Location: florida

250.35 Dollars($)

Posted: Fri Sep 12, 2008 5:19 am Post subject: RE: reverse mortgage amount

Hi Andrew, You can get a reverse mortgage on a condominium but you'll have to satisfy the eligibility criteria for it. In order to find out how much you'll qualify for, you should talk to a few lenders and see what they have to offer you. What i suggest is, you can send in your request for no-obligation free mortgage quote to the lenders in this community. The lenders will analyze your situation and give you an estimate as to how much you can borrow. Good luck _________________ Mortgage Shopping made easy with booklet


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