Difference Between Traditional Mortgage
and Reverse Mortgage
Item Mortgage Reverse Mortgage
Purpose of loan to purchase a home to generate income
Before closing
borrower has no equity in
the home
borrower has a lot of
equity in the home
At closing borrower owes a lot, and
has little equity
borrower owes very little,
and has lot of equity
During the loan,
borrower...
makes monthly payments
to the lender
loan balance goes down
equity grows
receives payments
from the lender
loan balance rises
equity declines
At end of loan,
borrower...
owes nothing
has substantial equity
owes substantial
amount
has much less,
little, or no equity
Type of
Transaction
Falling Debt- Rising
Equity
Rising Debt- Falling
Equity
doc_840944819.docx
and Reverse Mortgage
Item Mortgage Reverse Mortgage
Purpose of loan to purchase a home to generate income
Before closing
borrower has no equity in
the home
borrower has a lot of
equity in the home
At closing borrower owes a lot, and
has little equity
borrower owes very little,
and has lot of equity
During the loan,
borrower...
makes monthly payments
to the lender
loan balance goes down
equity grows
receives payments
from the lender
loan balance rises
equity declines
At end of loan,
borrower...
owes nothing
has substantial equity
owes substantial
amount
has much less,
little, or no equity
Type of
Transaction
Falling Debt- Rising
Equity
Rising Debt- Falling
Equity
doc_840944819.docx