Reverse Mortgages: The Bank Pays You [mortgageinsurance-101.blogspot.com]
Question by MrStevens: What is a reverse mortgage and what banks issue them? Best answer for What is a reverse mortgage and what banks issue them?:
Answer by oncameratalent
A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.
Answer by wartz
Think of it as a regular mortgage loan except the lender can't foreclose you out when you don't make your payments but interest keeps accruing on the unpaid balance.
Answer by robert w
visit AARP.org to find out how bad a 'loan' they can be. ripe with outrageous fees , exclusions. considered rip offs in many states.
Answer by Mark C
They can be an arrangement where the bank determines a value on your house, and will agree to loan you about 80% of the total. They then give you monthly checks and increase the loan against your house by that much, until the loan is equal to the value of the bank's commitment to lend. For example, you do not owe anything on your house, and it is worth $ 100,000 Wachovia will pay you $ 560 per month for 30 yrs and then you, or your heirs will have a mortgage of $ 80,000 to pay back to them .
When you are planning for the future it is difficult to impossible to know exactly where you will stand twenty or thirty years down the line. Investments fluctuates, tax laws change, costs rise, expenses vary, and your life span cannot be predicted. The best you can do is make intelligent and informed projections and be fully aware of all of your options.
One way to generate some cash flow later in your life is through a reverse mortgage. This is one of those terms that is largely self explanatory. With a typical standard mortgage you make payments to the mortgage lender and you gain equity in return. With a reverse mortgage it is the other way around; the bank pays you, in essence buying equity in your home.
These payments can be received monthly as an ongoing source of reliable income, in a lump sum, or on an as-needed basis as an open line of credit. The only requirements are that you must indeed own or have significant equity in your home, live in it as your primary place of residence, and be at least 62 years old.
These loans can be useful, but they are not a panacea. Of course there is something in it for the lender, and the expenses include interest, origination fees, closing costs, and other fees. However, these costs can be folded into the loan so there are no required out-of-pocket expenses, and if your home was to appreciate that increase in value could offset these expenses.
The loan becomes due and payable at the time of your death or whenever you choose to move from the property voluntarily. You or your surviving family members could sell the house to pay the loan and pocket the difference, but you may also keep the home and pay off the loan using some other funding source if you so choose.
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