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August 10, 2011

What the heck is a Reverse Mortgage Loan???

POLITICS - You would think the USA would be wary of mortgages and loans, but the truth is mortgages are a necessary evil in today's economics.

A "Reverse Mortgage" (I had to look this up on Wikipedia), one of the few times I actually find use for that website, is a release of equity...

Think of it a bit like selling your house, but slowly...! Its usually only done by seniors who are in retirement and want to slowly sell off their home (and not leave it for their kids).

However there are two types of Reverse Mortgages... large lump sum payments or multiple payments (which can set up monthly, thus giving the senior more money for their monthly budget). Its really for seniors who find themselves stretched for cash as they get older and find gasoline/food/electricity/health care costs are higher than they predicted.

The Reverse Mortgages adds a lien to the property so when the property is eventually sold (ie. the old couple dies or moves somewhere else) then the bank / lender gets their share of the equity from the sale of the property.

It may feel weird getting a Reverse Mortgage (it even sounds weird), but since a lot of Americans lost their jobs during the 2007 - 2009 recession and/or were forced into early retirement it is becoming a reality for many Americans.

There is also the matter of how much you can actually get. It really depends on the interest rates different banks and lenders are offering, where you live (real estate prices and interest rates vary by state and city), thus making it tricky to get an estimate on a reverse mortgage loan. Not an actual loan, just an estimate in an effort to calculate both the value of your home and the amount you can actually get either all at once or on a monthly basis.

If you later find / save / inherit money then you can also pay off the loan immediately. There is no required duration.

The good thing is that if your property keeps going up in value (American real estate prices have hit rock bottom and are now rising again) you won't have lost anything but a bit of equity.

Check out more real estate news at My Search for a Home.

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