Reverse Mortgage And Lending Guidelines For Homeowners
This Blog On Reverse Mortgage And Lending Guidelines For Homeowners Was PUBLISHED On May 5th, 2020
Reverse Mortgages! 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 program 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 spouse’s additional income resulting from a husband or wife’s untimely death
In this article, we will cover and discuss reverse mortgages for seniors.
Advice On Reverse Mortgage
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?
First, so everyone understands, a Reverse Mortgage simply works backward.
- 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%.
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 keeping the original principal 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 Real Estate appreciation. In most cases this is would be a fantastic investment.
This Reverse Mortgage Article was written by Massimo Ressa, Chief Executive Officer of Gustan Cho Associates Mortgage Group.