If you've somehow missed the tv commercials or junk mail trying to get you interested in the reverse mortgage you probably live a sheltered existence.
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.
To understand a reverse mortgage you simply need to understand a traditional forward mortgage. A forward mortgage is simply a loan utilizing equity in the house to back the security of loan.
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.
They are very similar. They just works a little differently.
The lender is loaning money to you. You get to use that money for whatever purpose you desire. It's your money afterall.
There is any number of things we can do with the money from our mortgage. If its a purchase those proceeds are used to pay the seller. If it's a refinance it's limitless.
The point is you are accessing the equity in your home to accomplish something monetarily.
The reverse mortgage is a popular tool to tap this money as the borrower need not repay the bank on a periodic basis.
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.
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.
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. - 15224
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.
To understand a reverse mortgage you simply need to understand a traditional forward mortgage. A forward mortgage is simply a loan utilizing equity in the house to back the security of loan.
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.
They are very similar. They just works a little differently.
The lender is loaning money to you. You get to use that money for whatever purpose you desire. It's your money afterall.
There is any number of things we can do with the money from our mortgage. If its a purchase those proceeds are used to pay the seller. If it's a refinance it's limitless.
The point is you are accessing the equity in your home to accomplish something monetarily.
The reverse mortgage is a popular tool to tap this money as the borrower need not repay the bank on a periodic basis.
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.
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.
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. - 15224
