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3 Fundamental Differences Between Mortgage and Reverse Mortgage Loans


Mortgage loans and reverse mortgage loans are two financial products offered by several financial institutions across India. However, there are some fundamental differences between a traditional mortgage loan and a reverse mortgage loan.

Differences between mortgage loans and reverse mortgage loans

  • Mortgaged asset

Mortgage loans aid borrowers financially to purchase or construct a property and then repay the amount over a specific period. Once the due amount is repaid, individuals will be entitled to complete ownership of their property.

On the other hand, a reverse mortgage loan allows borrowers to avail credit against their existing property, which they own. In this case, individuals are not liable to repay their debt, but they are permitted to use the mortgaged properties as long as they or their spouses are alive.

  • Repayment

Another fundamental difference between these two financial products is the method of repayment. In case of a traditional mortgage loan, borrowers are required to follow a fixed repayment schedule over a period to repay their debt.

However, reverse mortgage benefits retirees who require periodic financial assistance and do not carry such schedules for repayment. Instead, after the borrower’s demise, the property is auctioned for recovery. Also, the heir can choose to repay this amount to regain his/her right to ownership.

  • Ownership

In case of a mortgage like a loan against property, financial institutions hold the ownership of the mortgaged property until the loan is repaid.

However, reverse mortgage loans allow individuals to use the property until their demise. If the primary applicant passes away before his/her spouse, then the spouse has the right to stay on that property until their death.

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