7 – Reverse Mortgage Is Similar To Home Equity Loan Nothing could be further from the truth. In order to qualify for a home equity loan, the lender thoroughly scrutinizes your credit history, fully documents your income and appraises the value of your home.  Based upon favorable results (meeting lender’s standards), the lender will offer a credit line of $ x,xxx dollars on which you will make principal and interest payments each month until your loan is paid in full.  This is a full-recourse loan secured by your home as collateral.  If something happens to you, your heirs or your estate will have to pay off the home equity loan… even if the loan balance it is greater than the value of the home.  (Possible in markets where real estate values are declining).  If the home is sold and a balance remains, the lender will sue your estate to recover the remaining balance. Finally, the lender can close your home equity loan (or sharply reduce it) at will.

A reverse mortgage, on the other hand is a very different product. Neither your credit history nor your income is a factor in qualifying.  Substantially greater $$$ amounts may be available to you in a credit line or you may take monthly payments from the lender for as long as you remain in the home… or both.  No repayments are required as long as you remain in the home.  This is a non-recourse loan… meaning neither you, nor your heirs nor your estate has any liability to repay.  If you leave the home owing more than the property is worth, the lender has no option to sue for any balance remaining.  You can never owe more than the home value at the time the loan is due.

These are huge differences that you should understand fully.

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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