Find out more on Debt Consolidation Credit Counseling In Phoenix Now!
Sunday, December 28, 2008
One of the biggest questions I get from my prospective reverse mortgage customers centers around what happens to the home and more importantly the homes equity after death.
A reverse mortgage lender loans money, typically anywhere from 50% to 75% of homes value, to the borrower. The borrower uses that money as he or she sees fit.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage companies are very careful about how much money they lend in relation to the value of the home. This is why age plays such an important role in this calculation.
The calculated loan amount helps the lender avoid being placed in a position where more is owed than the value of the home. The norm is the borrower or the borrower's heirs will have equity at sale.
If the borrower dies the home is passed along to the estate for liquidation to pay the mortgage company back. The mortgage company allows roughly 12 months for a sale.
Lenders are in the interest business. They are not in the foreclosure business. While the home is being marketed for sale they are still making money. Therefore, if it is being marketed at a fair price by a professional realtor, extensions are normally granted.
Of course the home always gets sold and the mortgage company gets their fair share of the proceeds. They are not, as many people still believe, entitled to all of the remaining proceeds.
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.
From time to time a senior lives far longer than expected and the mortgage amount is greater than the sale price of the home. If this is the case, no worries for the borrower or heirs.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
Regardless of some of the mythology reverse mortgages are fairly safe for the borrower and estate.
A reverse mortgage lender loans money, typically anywhere from 50% to 75% of homes value, to the borrower. The borrower uses that money as he or she sees fit.
Interest accumulates on top of itself and the loan to the senior borrowers. This is how reverse mortgage lenders make money. Only upon death and/or sale of the home is the loan typically required to be repaid to the lender.
Reverse mortgage companies are very careful about how much money they lend in relation to the value of the home. This is why age plays such an important role in this calculation.
The calculated loan amount helps the lender avoid being placed in a position where more is owed than the value of the home. The norm is the borrower or the borrower's heirs will have equity at sale.
If the borrower dies the home is passed along to the estate for liquidation to pay the mortgage company back. The mortgage company allows roughly 12 months for a sale.
Lenders are in the interest business. They are not in the foreclosure business. While the home is being marketed for sale they are still making money. Therefore, if it is being marketed at a fair price by a professional realtor, extensions are normally granted.
Of course the home always gets sold and the mortgage company gets their fair share of the proceeds. They are not, as many people still believe, entitled to all of the remaining proceeds.
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.
From time to time a senior lives far longer than expected and the mortgage amount is greater than the sale price of the home. If this is the case, no worries for the borrower or heirs.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
Regardless of some of the mythology reverse mortgages are fairly safe for the borrower and estate.
About the Author:
Get the low down in an excellent guide to California reverse mortgage here. Many questions answered regarding the California reverse mortgage in this educational site.
posted by Credit Counseling at
9:05 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home