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Tuesday, January 20, 2009
Just open your mailbox or flip on the TV. In your mail your getting tons of solicitations and on TV are recognized spokespeople talking about the reverse mortgage.
Truth be known most seniors have heard about reverse mortgages but still have very little understanding of what they really are.
That's why I'm here. I'm the answer man and I'm here to educate.
The first thing to do is throw out any preconceived notion, anything you've heard from some guy, and keep in mind a reverse mortgage is nothing more than a mortgage on your home. The lender loans money using equity as security for its investment.
In this prior paragraph this definition could describe a traditional mortgage or a reverse mortgage. That is my point. I don't want people thinking the reverse mortgage is much different than a forward mortgage.
Although these loans have their differences they are fundamentally the same.
The lender is loaning money to you. You get to use that money for whatever purpose you desire. It's your money afterall.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
All I'm saying is the borrower taps the built up equity or money in the home to use for the borrower's benefit.
The benefit of the reverse mortgage is you do not ever have to make monthly payments to the mortgage company.
Well, if the lender isn't receiving payments how does it stay in business, and why would it do this?
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.
One thing I would like to get across is the bank never has ownership of the house during the course of the loan.
The real hook to reverse mortgage, which is really helping many seniors in dire financial straights, is the lack of period payment to the lender.
The downside is closing costs are higher than typical forward mortgages, which can make the reverse mortgage a poor choice in certain circumstances.
Truth be known most seniors have heard about reverse mortgages but still have very little understanding of what they really are.
That's why I'm here. I'm the answer man and I'm here to educate.
The first thing to do is throw out any preconceived notion, anything you've heard from some guy, and keep in mind a reverse mortgage is nothing more than a mortgage on your home. The lender loans money using equity as security for its investment.
In this prior paragraph this definition could describe a traditional mortgage or a reverse mortgage. That is my point. I don't want people thinking the reverse mortgage is much different than a forward mortgage.
Although these loans have their differences they are fundamentally the same.
The lender is loaning money to you. You get to use that money for whatever purpose you desire. It's your money afterall.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
All I'm saying is the borrower taps the built up equity or money in the home to use for the borrower's benefit.
The benefit of the reverse mortgage is you do not ever have to make monthly payments to the mortgage company.
Well, if the lender isn't receiving payments how does it stay in business, and why would it do this?
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.
One thing I would like to get across is the bank never has ownership of the house during the course of the loan.
The real hook to reverse mortgage, which is really helping many seniors in dire financial straights, is the lack of period payment to the lender.
The downside is closing costs are higher than typical forward mortgages, which can make the reverse mortgage a poor choice in certain circumstances.
About the Author:
This is for California. Know you stuff regarding the reverse mortgage here. Additionally, serious learners can get a California reverse mortgage report.
posted by Credit Counseling at
2:52 PM
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