Reverse Mortgages vs Traditional Refinance Loans

Traditional refinance loans mean that the homeowner borrows a large amount of money and makes monthly payments. As payments are made, the loan balance gets smaller and the equity grows.

With a reverse mortgage, the homeowner borrows small amounts – monthly or at other intervals through a line of credit. Over the course of time, the loan balance gets larger, and equity gets smaller. The balance due can come from home sale proceeds or from other resources, such as savings, insurance, or possibly applying for a new mortgage. There is no requirement that the home be sold, only that the loan be repaid.

Flexible Access to Extra Income

Reverse mortgages allow borrowers to obtain loan proceeds:

• in a lump sum to cover large expenses
• in monthly installments to supplement income
• as a line of credit to draw on as necessary

There is even a choice for an immediate advance of funds. And borrowers can change funds-distribution plans as many times as they wish.