Home Equity Loans vs Reverse Mortgages
While the principles of a home equity loan and a reverse mortgage are similar, there are differences in terms of eligibility and repayment. Both loans are used to improve a persons living situation by making necessary repairs to a home, paying off other debts, or have extra money for emergency usage. This is up to the home owners discretion and will not be judged by a lender. Taking out a home equity loan or reverse mortgage should be well researched and should help improve a persons financial situation, not hurt it by bringing on too much financial responsibility.
Home Equity Loans
Home equity loans are available to anyone who owns a home or is paying a mortgage on one. These loans can be considered a second mortgage that can be used at any time at the home owners discretion. While many people use home equity loans for emergency uses, some people use the money to get out of debt, make repairs, or take vacations. The loan is paid off monthly and the interest rate can be very low.
Reverse Mortgages
Reverse mortgages are similar to home equity loans because they too are lines of credit. A person must be over 62 to qualify, however. Many retired people take out this loan to supplement they income, make improvements on their home, or to use in case of emergency. A reverse mortgage is like an extra savings account that one can use in case of illness or an accident. Other differences between a reverse mortgage and a home equity loan are that a person does not have to repay the loan until the home is sold. The line of credit is for the total value of their home regardless of whether they are still paying a mortgage or not. Many people will use the reverse mortgage to pay off their home.
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