2007-02-04 13:47:07 · 4 answers · asked by tom 1 in Environment
A reverse mortgage is a mortgage loan that you do not have to pay back for as long as you live in your home. You can take the money all at once, as periodic payments (monthly, annually, etc.), or as an open line of credit. The loan is limited to a set percentage of the value of your home, and is calculated in part using actuarial tables based upon the age of the youngest borrower (the older you are, the more money you can borrow). Reverse mortgages are only available where all homeowners/borrowers are at least 62 years of age. Interest will accrue on the loan amount and all other fees throughout the life of the loan, which is why older borrowers may borrow more money. Upon the death of the last living borrower, the sale of the home, or the abandonment of the home by all borrowers, the loan, plus fees and interest, must be repaid. If the amount due is less than the value of the property, the borrower(s) or their estate gets the difference. If the amount due is more than the value of the property, the loan is paid in full from all the proceeds of the same. The lender has NO recourse against the borrower or the borrower's estate for the balance.
2007-02-04 14:03:51 · answer #1 · answered by legaleagle 4 · 0⤊ 0⤋
I reverse mortgage is a loan on which you pay LESS than the interest due. After a specified period of time, you then owe MORE than the original amount.
For example, if you buy a house and borrow $100,000 at 6% interest, you would owe $500 in interest alone the first month. A conventional mortgage would have you paying a little more, say $550, so that $50 goes to principal, and then the next month you'd own $99,950 and the interest would be a little less the principal a little more.
in a reverse mortgage, you might pay $400 on the same loan, so that after 1 month you now owe $100,100, after the second month, $100,202 (or something - I didn't do the math), etc. The reason banks are willing to do this is that they believe the house is appreciating in value. If after a year, you owed $101,340, for example, but could sell the house for $120,000, the bank would be completely safe. You would get your annual raise at work and be able to pay a higher interest rate.
it's a way to get people into houses that they could not normally afford.
2007-02-04 13:55:32 · answer #2 · answered by firefly 6 · 0⤊ 0⤋
Basically a company is buying your house from you while still allowing you to live in it. They pay you a monthly rate on the house until they've made all the payments, just like when you buy a house.
2007-02-04 13:55:59 · answer #3 · answered by Uther Aurelianus 6 · 0⤊ 0⤋
Yes if carried out and thought out properly. Not all the time though it depends on how fixed the victim of the reverse psychology is on their decision
2016-05-24 09:28:56 · answer #4 · answered by Shivani 4 · 0⤊ 0⤋