What is the difference between mortgage and reverse mortgage?

Answer 1

A mortgage and a reverse mortgage are both types of home loans, but they work in opposite ways.

A mortgage is a loan that helps a borrower purchase or refinance a home. The homeowner borrows money from a lender and repays it through monthly installments, which include principal and interest. Over time, as the borrower makes payments, the loan balance decreases, and home equity increases. If the borrower fails to make payments, they risk foreclosure.

A reverse mortgage, on the other hand, is designed primarily for homeowners aged 62 or older who want to convert their home equity into cash. Instead of making monthly payments to the lender, the homeowner receives payments from the lender—either as a lump sum, monthly payments, or a line of credit. The loan balance increases over time as interest accrues, and repayment is not required until the homeowner moves out, sells the home, or passes away. However, the homeowner must continue paying property taxes, insurance, and maintenance costs to avoid foreclosure.

In simple terms, a mortgage requires the homeowner to pay the lender, while a reverse mortgage allows the homeowner to receive payments from the lender using their home equity.

Answer 2

In a regular mortgage the person is making payments o the mortgage holder in order to build equity in their home. In the case of a reverse mortgage, the bank is making payments to the person against the equity that is in the home.

A reverse mortgage allows you to draw on the equity of your home with out having to sell it. Reverse mortgages were created by the U.S. Department of Housing and Urban Development and are federally insured private loans.

A reverse mortgage loan is repaid only when you sell your home or no longer live there as your principle residence.