Good Golly! What is a Reverse Mortgage?
Just open your mailbox or flip on the TV. In your mail your getting tons of solicitations and on TV are recognized spokespeople talking about the reverse mortgage.
Even with all of this information being thrown at us most sixty two plusers can't give a rudimentary explanation of how a reverse mortgage works.
So here we are. Here to make this subject clear.
The reverse mortgage is no more than a mortgage on your home. A mortgage lender actually uses the equity you've built up in your home as security for the money they lend to you.
What I painted was not just the picture of a forward loan but a reverse loan as well. This is what i want to get across to all those who think this mortgage is something it isn't. There is too much bologne flying around.
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.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
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.
Well, if the lender isn't receiving payments how does it stay in business, and why would it do this?
Mortgage companies and more particularly their investors are in the reverse mortgage business for the long haul. Money is made by the accrual of interest on top of what is loaned to the borrower.
Most times the mortgage lender is repaid its loan plus accumulated interest by the sale of the property. Either the borrower dies or the borrower sells voluntarily.
One thing I would like to get across is the bank never has ownership of the house during the course of the loan.
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.
Its not all a bowl of cherries for the reverse mortgage. High costs and possible negative equity positions for the borrower are just a couple of the downsides.
Even with all of this information being thrown at us most sixty two plusers can't give a rudimentary explanation of how a reverse mortgage works.
So here we are. Here to make this subject clear.
The reverse mortgage is no more than a mortgage on your home. A mortgage lender actually uses the equity you've built up in your home as security for the money they lend to you.
What I painted was not just the picture of a forward loan but a reverse loan as well. This is what i want to get across to all those who think this mortgage is something it isn't. There is too much bologne flying around.
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.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
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.
Well, if the lender isn't receiving payments how does it stay in business, and why would it do this?
Mortgage companies and more particularly their investors are in the reverse mortgage business for the long haul. Money is made by the accrual of interest on top of what is loaned to the borrower.
Most times the mortgage lender is repaid its loan plus accumulated interest by the sale of the property. Either the borrower dies or the borrower sells voluntarily.
One thing I would like to get across is the bank never has ownership of the house during the course of the loan.
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.
Its not all a bowl of cherries for the reverse mortgage. High costs and possible negative equity positions for the borrower are just a couple of the downsides.
About the Author:
This is for California. Know you stuff regarding the reverse mortgage here. Additionally, download a good read of a California reverse mortgage report.
posted by Debt Consolidation Loan at
2:16 PM
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