Friday, March 03, 2006

Reverse Morgages

What is a Reverse Mogage? A a reverse mortgage is also known as a conversion morgage. The home owner uses his or her home as collateral to get cash. They are similar to a regular morgage, however a big differnece is the homeowner doesn't need an income to qualify and there are no monthly loan payments. With a reverse morgage, the loan and the interest on the loan are paid off when the property is sold.

So how exactly does a Reverse Morgage work? A reverse morgage is a was for a home owner to get equity out of there house without the requirment of taking on debt. Basically the reverse morgage turns over ownship of your house to the bank that is providing you with the reverse morgage.

Hows does the bank get the money back? When the property is sold—and this can be during the homeowner’s lifetime or after his or her death—the sale price of the property pays back the loan. The lender must accept only the sale price and cannot—by law—go after the homeowner’s other assets.

When should you consider a Reverse Morgage? If the homeowners needs cash they can pull equity from their home, without incurring monthly expenses. The advantages of the reverse morgage is the lenders cannot force homeowners to sell the property to pay back the loan. The Reverse mortgages ensure that the own can live in the property for as long as he or she lives. This rule applies even if the loan and interest grow to exceed the value property’s value.

When you should stay away from a Reverse Morgage? Of course the fees for a Reverse morgage are high. Lenders aren't stupid they want to make a profit off your reverse morgage. But the home owner does not have to pay for the fees until the house is sold. The fees incorporated into the loan and not paid upfront. The key point is a reverse mortgage can significantly more in fees than a conventional morgage. A lot of times the Reverse morgage is a last resort if the homeowner really needs cash.

Rules and regulations of Reverse Morgages? Again to reduce their risk and hopefully ensure themselves of profit, lenders will limit reverse mortgage loan amount to something less than the property’s full value. The older you get the more you could borrow. You must be at lease 62 years old.

Whats the max you can borrow with a reverse morgage? The most popular option, the Home Equity Conversion Morgage, which is limited to $312,896. Another options is the Fannie Mae Home Keeper loan which limits the loan aount $359,650.

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Note: Morgage is spelled mortgage and was intentionally misspelled on this page to help you in your serach.


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