REVERSE MORTGAGES AND EQUITY LOANS, SIMILAR BUT DIFFERENT
Although a Reverse Mortgage is a lot like an Equity Loan, there are some significant differences.
(a) With a Reverse Mortgage, your credit score is not a determining factor.
(b) Unlike an equity loan, you make no monthly mortgage payments.
(c) With an Equity loan, if you are looking for more money, you would have to refinance, but with a reverse mortgage, you can choose a line of credit (if qualified with your home's equity) that grows over time on a portion or all of what is kept in your line of credit.
(d) With a HELOC/Home Equity Line of Credit, there are interest-only payments during the draw period, and then you begin making monthly mortgage payments.
ADVANTAGE OF THE HECM: A GROWTH RATE ON THE REVERSE MORTGAGE LINE OF CREDIT!
With a reverse mortgage line of credit, the unused portion of the HECM line of credit grows over time at the same rate of interest charged on your loan plus an additional 1/2% thereby giving you access to more funds in the future. Having funds available to you for future needs or emergencies is a comforting feeling and enables you to plan for unforeseen events. The line of credit, of course, is tax free as it is based on your equity and is not considered income. At maturity, at the end of your loan, you only pay back what monies you have used.