Reverse Mortgage And Lending Guidelines For Homeowners

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Reverse Mortgage And Lending Guidelines For Homeowners

This Blog On Reverse Mortgage And Lending Guidelines For Homeowners Was Written By Massimo Ressa CEO of Gustan Cho Associates Mortgage Group at Loan Cabin Inc.

Reverse Mortgage Explained! If you are researching reverse mortgages on Google, Bing, or Yahoo you are probably being inundated with information.

  • As a matter of fact you are probably experiencing information overload
  • It’s no doubt if used correctly, the reverse mortgage is one the greatest tools for financial freedom for seniors and their savor many times— rescuing seniors from financial crisis like foreclosure or losing a spouses additional income resulting from a husband or wife’s untimely death

Advice On Reverse Mortgage Explained From Family Members

However, here is what they don’t tell you.

  • Many times when a senior applies for a reverse mortgage or simply considering one they have children, family friends and other loved ones giving them advice
  • The problem is that most of the advice is not correct, unwarranted, or motivated by heir’s greed considering their own financial interests in the eventual inheritance of the senior’s property

Keep An Open Mind When Family Is Advising You On Reverse Mortgage

I am only addressing protecting the inheritance and the equity of a senior’s property.

  • You are never going to stop misinformation and the family friend know it all giving you advice, right or wrong. We all have that uncle, or buddy who is an out of work auto mechanic that gives advice about brain surgery

How Does a Reverse Mortgage Work? Reverse Mortgage Explained

First, so everyone understands, a Reverse Mortgage simply works backwards.

  • A regular mortgage is a Forward Mortgage
  • Which means when you make payments your balance eventually decreases, or you kill it or mortgage it
  • Google that phrase

A Reverse Mortgage works the opposite way. You don’t make payments and the actual interest accumulates because it doesn’t get paid. So if you were to borrow $100,000 at 5% to keep it simple, at the end of one year your balance would increase to $105,000, or your $100,000 principle loan balance plus $5,000 interest for the year at 5%.

Reverse Mortgage Explained And Heirs Of Property

Many times the heirs, the senior’s children, the grandchildren or the person(s) designated to inherit the property if the borrower were to pass are concerned about inheriting a property that has no equity.

  • In theory, although it doesn’t happen much, this is possible
  • A senior could take out a reverse mortgage at 62 years old and live to 95
  • The house could accumulate a lot of interest in 35 years

Using the above example, the home would accumulate 5% interest a year.

  • The heirs could simply get together every month and cover it
  • They would have to cover a little over $400 a month
  • They would actually make a payment to the Reverse Mortgage Servicer
  • Then they would actually protect the equity and their eventual inheritance by keep the original principle loan balance pretty much the same

This is actually a great investment for the heirs of the Reverse Mortgage client. They will actually protect the equity of their eventual inheritance and many benefit for the Real Estate appreciation. In most cases this is would be a fantastic investment.

This Reverse Mortgage Explained Article was written by Massimo Ressa, Chief Executive Officer of Gustan Cho Associates Mortgage Group at Loan Cabin Inc. NMLS 1657322

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