Unless you have a lot of cash piled up somewhere in a hidden place, you will have to think about getting a mortgage in order to buy a home. The market is definitely booming these days, so getting a mortgage is becoming even harder for young people, and that can be a huge cause of frustration. Yet, we cannot fail to mention that this is usually the only way for people to actually get a home, which is why they will do everything they can in order to get approved.
As if this wasn’t enough, financial institutions have also invented another thing, i.e. another opportunity for people to borrow some money that they may need at a certain point. The opportunity I am referring to is called a reverse mortgage, and you can read more about it here. When you first hear these two terms, you might get all confused and start wondering which option you should go for. If that’s what is crossing your mind, then I have an important announcement to make.
They Don’t Serve The Same Purpose
Basically, even though these two concepts share a name, they don’t really serve the same purpose, so it is impossible for you to choose one over the other. This simple explanation might be turning the entire title of this article into a bit of a nonsense, but I left it like that on purpose, and let me now explain why. In short, a lot of people hear these two terms and immediately assume that they are the same concept with a few distinctions that they need to learn and then choose one or the other when buying a home.
That, however, couldn’t be further from the truth. Now that you know that these two concepts are entirely different, you are most likely wondering about the purposes that each of them serves. In different words, you want to learn about both of the concepts so that you can understand them better and finally get your facts straight on everything. Who knows, you might even realize that the newer concept, i.e. the reverse mortgage, might be the right thing for you right now.
What Is A Mortgage?
So, if you are ready to start learning right now, let us start with the more known concept – the one that has been around for a while and has helped a lot of people get their homes. You could have probably guessed that I am talking about mortgages. Buying a home with the help of this concept has been a possibility for quite a long time now and if you are among our older readers, then you are perfectly familiar with all of this.
This is what you might not be aware of, though: https://www.forbes.com/advisor/mortgages/reverse-mortgages/
Basically, when you decide to get a home and you don’t have the cash to buy it, you have to find a lender and apply for a mortgage. Then, the lender will review your application, take a look at all the documents that you have provided and check if you are qualified to get approved. This depends on your income, your credit score and a few other factors. If everything is in order, you’ll get approved.
So, to sum things up here, a mortgage serves to help people buy homes. The other concept that we are about to have a look at right now severs a bit of a different purpose, which is why it might be a bit weird that we are comparing them. As I have mentioned, though, people sometimes cannot tell the difference, or they simply cannot grasp the meaning of this second concept, and that’s precisely why we need to explain it.
Whet Is A Reverse Mortgage?
To cut right to the chase, a reverse mortgage serves the purpose of helping people borrow some money against the equity of their home that they have built up overtime. They can get tax-free cash through this opportunity and they can use it anyway they want. So, basically, it is a loan that you can get against your home equity.
As you can see, there is absolutely nothing unusual about this second concept. I hope that the mortgage vs reverse mortgage battle is over right now and that you know precisely which concept severs which purpose. So, if you want to buy a home, you’ll take the age-old, conventional option. On the other hand, if you already have a home and want to get some cash, then you’ll use this second option.
This brings us to the conclusion that the reverse mortgage is usually a great opportunity for the elderly who have had a home for a long time. Of course, if you’re younger and you’ve still had a home for a while, you can definitely use it as well. The difference is now clear, so you can easily figure out what you need.