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.
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 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 mortgage company doesn't really care what the money is used to purchase. It makes money on the interest and servicing of the loan.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
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.
Of course that begs the question, "how does the mortgage company make money?" Now we're talking.
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.
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 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 mortgage company doesn't really care what the money is used to purchase. It makes money on the interest and servicing of the loan.
The mortgage proceeds may be used to buy a house, to go on vacation, pay off credit card debt, or to pay daily bills.
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.
Of course that begs the question, "how does the mortgage company make money?" Now we're talking.
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.
No comments:
Post a Comment