what is meant by reverse mortgage? At age 62,?
television commerical, "at age 62 you can reverse your mortgage" what does this mean?? "and pay nothing" ???>>
- rcdruryLv 71 decade agoBest Answer
If I am understanding Dagger accurately, he is incorrect. The payment for your home is either an annuitization of the current value of your home, or some portion of it, over your life expectancy; or a lump sum payment based on that annuity. In either case, you never surrender your home prior to your death.
He is somewhat correct in that the value of your home upon which the loan was based is surrendered upon your passing. If the entire home value is mortgaged, which is usually not the case, the bank then owns your home unless your heirs wish to finance it. If only a portion of the home's value is mortgaged, that portion must be bought back from the bank in order for heirs to retain the home. Otherwise, the home remaining home value is liquidated as part of your estate.
Added: A reverse mortgage is no more of a "rip-off" than any other financial strategy. Its appropriateness is based on one's specific scenario. For some, albeit a minority, there is no better solution available.
- 4 years ago
These offers have been designed to attract the senior citizens due to tax-free loan advances that have no impact on Social Security or Medicare advantages. Reverse mortgages are costlier than regular loans as they are increasing debt loans. The interest is totaled into the actual loan amount at the end of every month. Hence the total interest outstanding rises dramatically over the period of time, since the interest goes on compounding. Reverse mortgages consume all a part of the equity in a home. Hence the total assets of the homeowner and their heirs decrease. The borrowers also have to pay origination fees and closing costs; and at times servicing fees. These costs vary from lender to lender. Interest on reverse mortgages cannot be subtracted from income tax returns till the borrower repays the loan either partly or wholly. As homeowners can keep the title to their home, they are liable for taxes, insurance, fuel, maintenance, and other associated housing expenses.
- Anonymous1 decade ago
rcdrury is right, and there is never a "pay nothing". There are substantial fees associated with a reverse mortgage and of course you still have to pay utilities etc. You will not get the full appraised value of your home, more like 60%.
It might be the best choice for some, but I suspect it will be the next round of predatory lending. Having depleted the retirement savings of a generation, they will now go for the remaining assets.
- Dagger_SALv 41 decade ago
Simply put, it means a bank slowly buys your house from you and until they pay it off, you get to live in it.
Now, the more complicated answer is that you borrow money from the bank and use your house as collateral. Instead of a lump sum amount, they pay you cash every month. If you live long enough, after about 15-20 years, you'll be homeless because the bank will own your home.
But what the bank hopes is that you'll die and your heirs will be forced with either paying back what they paid you, or surrendering the house to the bank for less than they paid.
Still sound like a great idea?
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- 4 years ago
question, my parent had a reverse mortgage and she passed and we are trying to give the house to the bank, now we keep getting forclosure notices and the run around. anyone have any suggestions?
- Anonymous1 decade ago
It's a rip off. You loose.
The broker gets your house up front and then pays you from the house as collateral monthly payments, with exorbitant fees.
Before you know, you lost the house and get no more money.
You are much better of, getting a conventional mortgage, put it in a money market and pay yourself.
It does not make any sense and should not be allowed by law.
- Anonymous5 years ago
complicated task. browse at search engines like google. this will help!