Exactly how does a reverse mortgage work?

Answer 1

Basically you take out a loan against the value of your home. The bank gives you cash in return for a payment that they expect when the owner dies, sells the house or vacates the home.

Unlike a traditional mortgage, the home owner makes no monthly payments. All the interest on the amount the bank lends you is added to the lien on the property and it's all paid out upon those events I mentioned.

These used to be marketed to older people who need immediate funds to live on, but don't want to retain the equity in their homes for their estates or future generations. Thing is, they are under some scrutiny for marketing and pricing practices. Make sure you do some research and understand fully the consequences...

Answer 2

First off all owners on title must be at least 62 years old and home must be your principle residence. The most popular is called the Home Equity Conversion Mortgage (HECM) accounting for approximately 90% of Reverse Mortgages done to date. There are what is known as Jumbo or Cash Account Reverse Mortgages, which are used for higher value homes usually 600K and above. What these loans do is to allow a senior to access a portion of their equity without having to make a monthly payment. The formula used to figure out how much equity one can access is the age of the youngest borrower, the value of the home or the HUD lending limit whichever is less, If you have a 300K home and the HUD lending limit in your area is 292K then the 292K figure is used, and the current interest rate. You can choose to receive these funds in either an lifetime monthly payment, a lump sum, a line of credit, or any combination. The loan is not due until you either sell the home or it's no longer your principle residence or when the last remaining borrower passes away. There are no restrictions on how you use the funds as it's your money. Also funds are non-taxable as they are considered by the IRS as loan proceeds not income. You want to make sure you speak with someone who works only in Reverse Mortgages, as it really is a specialized field, and someone who is also affiliated with the National Reverse Mortgage Lenders Association (NRMLA) which is the trade organization and adheres to their code of conduct. Be aware that there is now more then one HECM and you only want to talk about the HECM100, as it is the lowest interest rate and will allow for more access to equity. Thats a very quick overview, I'm sure its raised more questions!!!! Feel free to e-mail me [e-mail] if you have any questions or if you would like me to run a scenario for you.
Stephen
ReverseMortgageSpecialist.com

Answer 3

I haven't heard of a 'reverse mortgage' but I'm thinking it must be something like a 'self-directed mortgage', where you can actually use a large portion of every mortgage payment to invest and make money.

The neat thing about these mortgages is that you can actually pay down your mortgage sooner, increase your available credit and still invest for the future. I know of one couple who took out a 25-yr amortized mortgage 8 years ago and now they only owe 5 more years on the mortgage! Of course it doesn't suit all of us but why not have a look.

Check out World Financial Group (WFG) or the Royal Bank websites for details. RBC has a great little info video about their product. They call it the 'RBC Homeline Plan'. WFG refers to it as a Helock (unsure of spelling).

We tried to set one up but needed more money than was available through the self-directed mortgage. In a few years, maybe we'll be able to transfer into one though. How many of us enjoy spending SO MUCH on a place to live so that we don't have anything left to have fun with? No one I can think of.

If you need some extra, easy cash in the meantime, take a look at another amazing online opportunity for ALL adults, computer savvy or not.

Answer 4

I've seen more and more of these types of mortgages popping up when I go see my clients to help them with their finances. A reverse mortgage is where the equity in your home is now being paid toward you. As you probably know, the equity represents the value of your home. As your equity decreases, the value of your home decreases. When the equity runs dry, you will lose the home unless you pay this money back. Only people who are 62 and above can qualify for a reverse mortgage. If you die someday or you move out of the home, the loan must be repaid back or the home has to be sold.

In plain English, you can use the equity in your home as a supplemental retirement income. The catch is that you have to live at the home to receive it and you don't have to pay it back as long as you live there. If you die or move out, the loan has to be repaid.

Be careful of people recommending you to use your equity to fund your investments. Some states have prohibited this and took appropriate action against representatives and their firms.

Reverse mortgage is just a way to supplement your retirement income. You can also use it to fix your home or pay for property taxes.

Answer 5

Essentially a person remove financing from the worth of your house. The financial institution provides you with money in substitution for the repayment they anticipate once the proprietor passes away, offers the home or even vacates the house.

In contrast to a conventional home loan, the house proprietor can make absolutely no monthly obligations. All of the curiosity about the quantity the financial institution lends a person is actually put into the actual lien about the home and it is just about all paid on individuals occasions We pointed out.

These types of was previously promoted in order to seniors that require instant money to reside upon, however do not wish to support the collateral within their houses for his or her locations or even long term decades. Point is actually, they're below a few overview with regard to advertising as well as prices methods.
more info-


http://www.reversemortgagelendersdirect.com/reverse-mortgage-loan/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-calculator/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-rates/
http://www.reversemortgagelendersdirect.com/how-does-a-reverse-mortgage-work/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-information/

Answer 6

Suppose one had a home paid in full.
A bank will let one draw money against the value of the home.
The monthly amount would normally be determined by the value and the number of years one might draw.
I'm sure that the bank will not allow the full value to be drawn as it is possible that the value may decline over those years.
There are "FEES" involved for processing and maintaining the account.

Full disclosure is available.

Answer 7

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Reversemortgage.org http://www.reversemortgage.org/ .. is DEDICATED to making sure you understand how it works. There are different ways to take the money and you need to know which is best for a particular situation.

My 73 year-old mother went to her bank and the "personal banker" steered her towards a home equity loan and luckily she knew enough to leave it alone.

Best wishes,

pup

Answer 8

http://www.tishaandco.com/content/article.html?id=1365162

Where you use a mortgage to buy a house, you use a reverse mortgage to sell it.