Why Would I Want a Reverse Mortgage?
Understanding the Reverse Mortgage
The reality is a solid seventy percent of seniors still don’t know what the reverse mortgage is or how it works.
So here we are. Here to make this subject clear.
The first thing to do is throw out any preconceived notion, anything you’ve heard from some guy, and keep in mind a reverse mortgage is nothing more than a mortgage on your home. The lender loans money using equity as security for its investment.
What I just described in the forward mortgage is really no different than the description of a reverse mortage. I want to be clear here in efforts of eliminating all odd ball notions of what it really is.
The point is these two mortgages are structurally similar, with just a few differences.
The mortgage company doesn’t really care what the money is used to purchase. It makes money on the interest and servicing of the loan.
That loan could be to refinance a current forward mortgage, cash to pay bills and other life expenses, or perhaps to make investments.
All I’m saying is the borrower taps the built up equity or money in the home to use for the borrower’s benefit.
The benefit of the reverse mortgage is you do not ever have to make monthly payments to the mortgage company.
So, then how does the lender make its profit? I’m so glad you asked….
The lender simply doesn’t make money today. Instead of receiving monthly payments the lender lets interest accumulate on itself. It is the quintessential negative equity mortgage.
The bank is only repaid either when the borrower decides to make a full repayment or when the borrower dies and home is sold.
Important to note, because of all myths, is the borrower or it’s family never loses ownership of the home during the mortgage.
With the ever increasing cost of life expenses and an ever not increasing income for so many seniors the reverse mortgage is gaining big popularity.
What people must understand is it is not the perfect answer to all financial situations. For example its closing costs can be prohibitively high in the wrong situation.
by Matt Vanrock
Now you have a taste Californians. Fill your brain with huge reverse mortgage knowledge at this site. Additionally, serious learners can get a California reverse mortgage guide at this little site.
Understanding the Reverse Mortgage
The reality is a solid seventy percent of seniors still don’t know what the reverse mortgage is or how it works.
So here we are. Here to make this subject clear.
The first thing to do is throw out any preconceived notion, anything you’ve heard from some guy, and keep in mind a reverse mortgage is nothing more than a mortgage on your home. The lender loans money using equity as security for its investment.
What I just described in the forward mortgage is really no different than the description of a reverse mortage. I want to be clear here in efforts of eliminating all odd ball notions of what it really is.
The point is these two mortgages are structurally similar, with just a few differences.
The mortgage company doesn’t really care what the money is used to purchase. It makes money on the interest and servicing of the loan.
That loan could be to refinance a current forward mortgage, cash to pay bills and other life expenses, or perhaps to make investments.
All I’m saying is the borrower taps the built up equity or money in the home to use for the borrower’s benefit.
The benefit of the reverse mortgage is you do not ever have to make monthly payments to the mortgage company.
So, then how does the lender make its profit? I’m so glad you asked….
The lender simply doesn’t make money today. Instead of receiving monthly payments the lender lets interest accumulate on itself. It is the quintessential negative equity mortgage.
The bank is only repaid either when the borrower decides to make a full repayment or when the borrower dies and home is sold.
Important to note, because of all myths, is the borrower or it’s family never loses ownership of the home during the mortgage.
With the ever increasing cost of life expenses and an ever not increasing income for so many seniors the reverse mortgage is gaining big popularity.
What people must understand is it is not the perfect answer to all financial situations. For example its closing costs can be prohibitively high in the wrong situation.
by Matt Vanrock
Now you have a taste Californians. Fill your brain with huge reverse mortgage knowledge at this site. Additionally, serious learners can get a California reverse mortgage guide at this little site.
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New potential lending limit increase for HECM reverse mortgages. – The house yesterday passed the economic stimulus bill to help kickstart the economy. It included several measures, $550 billion in new spending.
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Annually Adjusting Reverse Mortgages? – Posted by Michael Pinter on 02/06/2009 01:13 PM, Reverse Mortgage in the Mortgage / Finance Channel, reverse mortgage, reverse mortgage information.
