There are several significant differences between a reverse mortgage and a traditional mortgage. First, a traditional mortgage helps a borrower purchase or refinance a home by making regular loan payments. This differs from a reverse mortgage, which does not require loan payments.* Second, a reverse mortgage is used to access the equity in a home. Rather than a loan to buy a home, you are borrowing against what you’ve paid into the home you already own. Third, a reverse mortgage is considered the “reverse” of a traditional mortgage because the loan balance will grow each month due to accruing interest and fees rather than decreasing over time as it would with a traditional mortgage. Last, there is a special type of reverse mortgage that can be used for buying a home: the HECM for purchase. The HECM for purchase requires a larger down payment than a traditional mortgage, but monthly mortgage payments won’t be required.*
* Homeowners must continue paying property taxes and insurance.