Article published by : emortgage2015 on Monday, July 04, 2016 - Viewed 665 times


Category : Mortgage

Differentiating Reverse Mortgage and Second Mortgage

Reverse mortgage and second mortgage are two confusing terms for loan borrowers. This confusion arise due to similarities that cause borrowers to mix up the terms. It's important to know distinguishing factors and other details about these two terms before telling mortgage brokers your choice.

Reverse Mortgage

Reverse mortgage is the process of obtaining funds through a property's equity, which is somehow similar to second mortgages. However, this mortgage is available to clients age 62 years old and above. Through reverse mortgage, senior citizens can get immediate funds to use for other financial needs.

Eligibility Requirements

Lenders don't set special eligibility requirements for reverse mortgage. As long as a client is 62 years old and older, a property owner, and with sufficient equity on the property, he's eligible for this mortgage type. Unlike other mortgage, people getting this loan is not required to have special medical requirements or proof of income. They can apply for this mortgage with ease and finally get their needed money.


The main advantage of reverse mortgage is it saves older property owners from being homeless, especially at their age. Owners don't have to sell their properties to settle debts or to simply live a comfortable life even without work. The money obtained through reverse mortgage can be used as a simple source of income for owners, allowing them to pay their bills or even have their own retirement fund.

Some property owners also use reverse mortgage funds for health care purposes. They also use this money as emergency fund.

What to Expect

Getting this mortgage is as simple as it can get with the absence of special eligibility requirements. Moreover, borrowers don't have to comply with spending limits in getting this loan. Spend what you want and the amount of money you can get.

Take note, however, that lenders won't give fixed amount to every reverse mortgage applicants. Factors cause differences on the loan amount available to clients like appraised home value, equity amount, age and others. Lenders will consider these factors then come up with loan amount suitable to your profile.

In getting this loan, borrowers have an option whether to get the amount in lump sump, fixed monthly amounts, or a combination of both. Other options may be available depending on what lenders offer. Many people who don't have immediate need for cash prefer fixed monthly payments to ensure they will receive regular payments in the future. Others prefer to get half of the total amount in lump sump then the remaining in fixed monthly payments to serve as their monthly income.

Second Mortgage

This option means getting a second mortgage or loan on a property. Property owners deciding to get a second mortgage often need a huge amount of money for debt consolidation and other financial needs. Regardless of their conventional or VA mortgage rates, they find themselves settling for this mortgage loan due to their financial needs.

Eligibility Requirements

While anyone can apply to get this loan, borrowers must remember that getting a second mortgage follows the same procedure as the first loan application. Therefore, the same eligibility requirements may be asked for borrowers to comply with. Lenders will also look for the amount paid on your first mortgage as well as your home's equity. Your credit score may also be assessed for the second time as part of the process.


Second mortgage is beneficial for its cheaper price than the first mortgage. Rates will be cheaper, which means it's easier to handle than the first mortgage. Buyers may also take advantage of this mortgage if the first mortgage's interest rate is way too expensive.

Working with a good lender may also be beneficial in reducing loan rates. Some lenders know that borrowers need this mortgage for fixing their financial problems, giving them better deals than before.

What to Expect

Borrowers must set their expectation in getting this mortgage. Getting a second loan means a property owner needs to pay twice their mortgage, something not easy to manage for some. Moreover, additional fees like a typically paid with mortgages must be settled in getting a second mortgage like closing costs, appraisal fees, and others. Hence, a buyer may spend quite an amount first before getting their mortgage.

Reverse mortgage and second mortgage have their differences. When you qualify for home loan and finally need to get these loans, check eligibility requirements as well as other details to ensure you'll make use of their benefits. Consult with a reliable lender to understand these loans better.

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By: emortgage2015

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