There is a new loan option available to people which is being advertised as an alternative to the reverse mortgage loan. It is called the REX loan. The main difference between the two loans is in the ownership of the home. With the reverse mortgage, you remain the owner of your home but you use home equity to receive income payments. With REX, you essentially enter into a partnership that says you will split the proceeds of any future home sale with the company that has partnered with you.
The reverse mortgage loan is designed as an option for seniors who are at risk of losing their homes because it’s too expensive to maintain them. They opt to take out a home equity loan which gives them lump sum and/or monthly payments. Those payments are taken out of the money already paid down on the home. This means that if the individual decides to sell the home later, the mortgage money will have to be paid back to the lender before profits of the home sale can be obtained.
In contrast, REX lets you partner with a lending company in the ownership of your home. You get a lump sum payment up front and sign an agreement to split the proceeds of a future home sale. When you move you give 30, 40 or 50% of the sale to the lending institution. There is no requirement that you move at any certain time so you can remain in the home and enjoy the lump sum payment as long as you would like. The drawback, of course, is that you are giving away a percentage of the value of your home.
It’s not clear yet whether the REX is a good alternative to the reverse mortgage for all people. Both may provide lump sum payments, and both may result in money of a home sale going to a lender. However there are different terms and benefits of each so a homeowner should review both options before moving forward with either type of loan.