Of the top concerns on my customers minds what happens to the home and remaining equity after death must be near the top of the list. Somehow, misinformation regarding this subject is rampant.
Reverse mortgage companies lend first and foremost on the appraised value of the home. A borrower can expect to see from fifty to seventy five percent of value.
Reverse mortgage companies make profit on the interest accrued on those moneys loaned to the senior. The contract is the bank is repaid the loan plus interest upon the sale of the property. Many times this is after the death of the borrower.
Banks are not foolish (except recently but lets assume this whole credit crisis didnt happen, okay?). They use actuarial tables to determine how much to lend.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
At death the home is typically willed to the heirs. The heirs are given roughly a year to sell the home. If it takes longer the lender normally allows extensions.
A twelve month window is not necessarily set in stone. Reverse mortgage companies love interest accumulation and will gladly give extensions on top of the 12 month sale time-frame if the home is being actively marketed per FHA guidelines.
When the home finally sells the reverse mortgage lender harvests its investment. They get the loan plus interest and nothing more.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Every so often more will be owed than the home is actually worth. In this event the heirs are in a safe zone.
The HECM or reverse mortgage is a non-recourse mortgage. This means the most the bank is entitled to receive is the sale price of the home minus closing costs. If more is owed, too bad for the bank.
Contrary to common reverse mortgage folklore there is a sense of fairness in this business. The equity belongs to its rightful owner. - 15224
Reverse mortgage companies lend first and foremost on the appraised value of the home. A borrower can expect to see from fifty to seventy five percent of value.
Reverse mortgage companies make profit on the interest accrued on those moneys loaned to the senior. The contract is the bank is repaid the loan plus interest upon the sale of the property. Many times this is after the death of the borrower.
Banks are not foolish (except recently but lets assume this whole credit crisis didnt happen, okay?). They use actuarial tables to determine how much to lend.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
At death the home is typically willed to the heirs. The heirs are given roughly a year to sell the home. If it takes longer the lender normally allows extensions.
A twelve month window is not necessarily set in stone. Reverse mortgage companies love interest accumulation and will gladly give extensions on top of the 12 month sale time-frame if the home is being actively marketed per FHA guidelines.
When the home finally sells the reverse mortgage lender harvests its investment. They get the loan plus interest and nothing more.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Every so often more will be owed than the home is actually worth. In this event the heirs are in a safe zone.
The HECM or reverse mortgage is a non-recourse mortgage. This means the most the bank is entitled to receive is the sale price of the home minus closing costs. If more is owed, too bad for the bank.
Contrary to common reverse mortgage folklore there is a sense of fairness in this business. The equity belongs to its rightful owner. - 15224
About the Author:
Get the low down in an excellent guide to the HECM in California, also known as a reverse mortgage, here. Get important answers about the California reverse mortgage informational website.
