What in the World is a Reverse Mortgage?
We've seen Robert Wagner on television, and if you are a senior, you are getting solicitations in the mail for a 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.
In efforts to clarify I will do my best here.
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 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.
Although these loans have their differences they are fundamentally the same.
We get mortgages because we need the money for something? We have equity in the home either from a down payment or built up equity over time.
That loan could be to refinance a current forward mortgage, cash to pay bills and other life expenses, or perhaps to make investments.
The point is you are accessing the equity in your home to accomplish something monetarily.
Why do people use a reverse mortgage? Because they can access this money and never be forced to make payments to the lender.
Of course that begs the question, "how does the mortgage company make money?" Now we're talking.
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.
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.
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.
In efforts to clarify I will do my best here.
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 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.
Although these loans have their differences they are fundamentally the same.
We get mortgages because we need the money for something? We have equity in the home either from a down payment or built up equity over time.
That loan could be to refinance a current forward mortgage, cash to pay bills and other life expenses, or perhaps to make investments.
The point is you are accessing the equity in your home to accomplish something monetarily.
Why do people use a reverse mortgage? Because they can access this money and never be forced to make payments to the lender.
Of course that begs the question, "how does the mortgage company make money?" Now we're talking.
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.
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.
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.
posted by Credit Counseling at
2:54 PM
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