Vast Majority of Seniors Still Not Reverse Mortgage Versed
We've seen Robert Wagner on television, and if you are a senior, you are getting solicitations in the mail for a reverse mortgage.
The reality is a solid seventy percent of seniors still don't know what the reverse mortgage is or how it works.
In efforts to clarify I will do my best here.
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 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 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....
Reverse mortgages are true negative equity loans. That means since the borrower makes no interest payments the interest accumulates and accrues against the equity of the home.
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.
The reason why everyone is so hot and heavy for reverse mortgages is the fact no monthly repayment is necessary. That is great.
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.
The reality is a solid seventy percent of seniors still don't know what the reverse mortgage is or how it works.
In efforts to clarify I will do my best here.
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 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 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....
Reverse mortgages are true negative equity loans. That means since the borrower makes no interest payments the interest accumulates and accrues against the equity of the home.
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.
The reason why everyone is so hot and heavy for reverse mortgages is the fact no monthly repayment is necessary. That is great.
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 Debt Consolidation Loan at
3:32 PM
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