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Reverse mortgage: How it differs from a traditional mortgage

Posted on: 24th Aug, 2005 02:37 am
whether it's a reverse mortgage or any traditional mortgage, both allow 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 that reduce your debt and build up equity. traditional mortgages are used to either buy or refinance your home.

reverse mortgages are primarily designed to help the elderly remain in their homes. instead of paying off the loan in installments, you don't pay anything until the home is no longer your primary residence. know more about 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 money
prior to closing, borrower has no equitya lot of equity in the property
at closing, borrower owes more and has equity in proportion to their down payment owes less and has some equity
during the loan period, borrower
  • pays monthly installments to the lender
  • loan balance reduces
  • equity increases
  • may receive monthly payments from the lender.
  • loan balance increases as you take out money.
  • equity gets reduced as you borrow more.
at the end of the loan period, borrower
  • owes nothing
  • has sufficient equity

owes nothing once property is sold

has much less equity

type of transaction falling debt, rising equity rising debt, falling equity

related articles
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.

Posted on: 08th Feb, 2006 12:12 pm
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?
Posted on: 26th Apr, 2006 06:44 pm
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,
Posted on: 27th Apr, 2006 10:04 am
regarding the reverse mortgage i want to know that should we first buy a flat and r you going to give the rent instead.
Posted on: 18th Aug, 2007 12:52 am
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.
Posted on: 18th Aug, 2007 02:58 am
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?
Posted on: 10th Sep, 2008 03:05 pm
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
Posted on: 12th Sep, 2008 05:19 am
>>Can I get a reverse mortgage on a coop and if so for how much?

Not today, but soon. HR 3221 was signed by President Bush last July 31 and there's a provision that enables Reverse Mortgages to be compatible with coops. However, HUD hasn't released the Mortgagee Letter that allows coops ... so we're waiting patiently and coops will be eligible after the letter is released.

The lending limit is $625,500.00 for 2009, nationwide.
Posted on: 03rd Jul, 2009 10:42 am
what is it?
Posted on: 31st Aug, 2009 04:36 pm

As far as I'm aware of, a closed end reverse mortgage is one which allows the borrower to draw lump sum money initially, but does not allow him to make additional draws. Those who need to pay off existing mortgages or make a new purchase often go for closed-end reverse mortgages. But those who prefer a payment for life opt for open-end reverse mortgages.
Posted on: 01st Sep, 2009 06:38 am
A closed end Reverse Mortgage is a fixed interest rate program whereas the homeowner must receive the entire distribution in cash when the loan funds.
Posted on: 01st Sep, 2009 08:16 am
Under what circumstances can a lender foreclosre on a reverse mortgage? Are there any?
Posted on: 14th Feb, 2011 02:08 pm
Hi riseabove!

Welcome to forums!

A reverse mortgage lender can foreclose the property when the borrower is deceased and the heirs of the borrowers are unable to refinance it into a normal, conventional mortgage.

Feel free to ask if you've further queries.

Posted on: 15th Feb, 2011 12:44 am
1. If the homeowners don't pay their property taxes.
2. If the homeowners don'tt pay their homeowners insurance.
3. If the homeowners don't take care of their property.
4. If the last homeowner on Title has Passed, and the Heirs decide they don't want the property.
Posted on: 15th Feb, 2011 07:26 am
This is the great information about reverse Mortgages.

[URL Deleted as per forum rules. Thanks.]
Posted on: 25th Apr, 2011 10:50 pm
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