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Conventional vs. Reverse Mortgage

The concept of a reverse mortgage may be simple, but there are many details to consider before purchasing one. Below is a comparison chart to help you understand and help you decide if a reverse mortgage is right for you.

Conventional mortgage Reverse mortgage
Purpose Purchase a home Get cash from home equity
At the time of closing: You owe a lot and have little equity in the home You owe little and have a lot of equity in the home
During the loan:
  • You make monthly payments
  • The loan balance decreases
  • Your equity grows
  • You receive monthly payments (as a lump sum, monthly payment, or line of credit)
  • The loan balance rises
  • Your equity decreases
At the end of the loan:
  • You owe nothing
  • You have substantial equity in the home
  • You may owe a large amount
  • You may have little or no equity in the home
Closing costs
  • Based on the amount of the loan
  • Can be financed as part of loan
  • Based on appraised value of the home
  • Can be financed as part of loan
In short…
  • Falling debt
  • Rising equity
  • Rising debt
  • Falling equity