Equity Concerns Answered Concerning the Reverse Mortgage
As a reverse mortgage specialist you might imagine I get slaughtered with questions from customers. One of the biggest concerns is what happens to the equity in the home after the borrower passes on.
Borrowers getting reverse mortgages can expect their lender to allow them to pull cash out of the equity of the home equal to 50% to 75% of the formal valuation of the house.
Where the lender makes money is on the accumulation of interest on top of the money which is loaned to the borrower. When the home is sold, many times at death of the borrower, the bank is repaid.
Reverse mortgage lenders use a calculation, based upon value, age, and interest rates to determine the amount to lend. This calculation creates a recognized safe position for banks.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
If the borrower dies the home is passed along to the estate for liquidation to pay the mortgage company back. The mortgage company allows roughly 12 months for a sale.
A twelve month window is not necessarily set in stone. Reverse mortgage companies love interest accumulation and will gladly give extensions on top of the 12 month sale time-frame if the home is being actively marketed per FHA guidelines.
It will eventually sell. When the home sells the bank is repaid the original principal amount loaned plus accumulated interest over the years. That is all the bank is entitled to receive.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Every so often more will be owed than the home is actually worth. In this event the heirs are in a safe zone.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
Borrowers getting reverse mortgages can expect their lender to allow them to pull cash out of the equity of the home equal to 50% to 75% of the formal valuation of the house.
Where the lender makes money is on the accumulation of interest on top of the money which is loaned to the borrower. When the home is sold, many times at death of the borrower, the bank is repaid.
Reverse mortgage lenders use a calculation, based upon value, age, and interest rates to determine the amount to lend. This calculation creates a recognized safe position for banks.
Based upon the calculation their bets are relatively covered and the vast majority of borrowers will have equity at their passing or when the home is sold, whichever comes sooner.
If the borrower dies the home is passed along to the estate for liquidation to pay the mortgage company back. The mortgage company allows roughly 12 months for a sale.
A twelve month window is not necessarily set in stone. Reverse mortgage companies love interest accumulation and will gladly give extensions on top of the 12 month sale time-frame if the home is being actively marketed per FHA guidelines.
It will eventually sell. When the home sells the bank is repaid the original principal amount loaned plus accumulated interest over the years. That is all the bank is entitled to receive.
Reverse mortgage folklore explains how the mortgage company gets all of this equity. Dirty, filthy banks praying upon seniors. On the contrary, the estate gets it.
Every so often more will be owed than the home is actually worth. In this event the heirs are in a safe zone.
Reverse mortgages are known as non-recourse loans. This means if more is owed that home can actually sell for to repay the bank, the heirs or borrower are not on the hook for the difference.
These mortgages are pretty safe bets for the borrower and the borrowers heirs.
About the Author:
Get the low down in an excellent guide to the reverse mortgage in California here. Get important answers about the California reverse mortgage informational website.
posted by Debt Consolidation Loan at
9:20 AM
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