When you take out a traditional mortgage or home equity loan, the lender is concerned with two primary factors: 1) the value of the property you are borrowing against and, 2) your regular income and ability to make payments on the loan. Often senior citizens have no problem meeting the first qualification. Indeed, many have fully paid off their primary mortgage and own their home free and clear.

However, the regular income factor is another matter. Many seniors receive little more than social security income on a regular basis. These are the “house rich and cash poor” seniors. Their houses are worth money and, perhaps, even paid for, but they don’t have enough cash to maintain them — or enjoy their retirement years. For people in this situation, it is difficult to qualify for traditional home equity financing.

In contrast, reverse mortgages are intended to help “house-rich” but “cash-poor” elderly access additional income to meet expenses, and to assist middle-income senior homeowners convert their home equity into liquid assets. The borrower’s income and credit worthiness are not of concern because payments are made from the lender to the borrower - i.e. reversed - rather than from the borrower to the lender.

Social tagging: HECM vs HELOC

A Few More Related Articles of Interest:

Reason 1: HELOC’s Require a Monthly Payment; Reverse Mortgages Don’t

Use a HELOC to Step Into a Reverse Mortgage

Home Equity Loan With a Reverse Mortgage, Your Home Pays You

Reason 2: With a Reverse Mortgage There is No Risk of “Losing the House”

More From Fidelity: Reasons Why Retirees Avoid Guaranteed Income Options