4 Replies to “What is reverse mortgage loan?”

  1. Instead of them making payment to own the house, The owner of the house gives signs a contract to receive payments out of what the house is worth.

    This could be used to pay for medical care since the senior will be be using the house after they pass.

  2. All a reverse mortgage does is pay off your home. You have to have more in equity than the value of your home. Instead of making mortgage payments, your home equity is used to pay for the house so you keep more money in your pocket.

  3. A reverse mortgage is called such, because instead of the homeowner paying the lender the lender pays the homeowner the money. It allows the homeowner to unlock the cash which is locked up in equity without risking losing their house.

    Why would the lender do this, in the long run they end up owning the property. Lets say a homeowner has a house worth 300,000 and have a small mortgage remaining of say $ 50,000. A reverse mortgage lender will allow the homeowner to cash out a portion of the equity and pay off the first mortgage. Since your equity is $ 250,000, for simplicity let’s say they allow you to cash out $ 200,000, $ 50,000 pays off your first mortgage and the remainder $ 150,000 comes to you, either in a lump sum or as monthly payments. The important thing to remember is the homeowner does not have to pay back this loan, it is paid back by the heirs, either by selling the house or out of estate.

    When the owner dies, the heirs either payback the $ 200,000 or they sell the house and pay back the $ 200,000. Keep in mind your house is worth $ 300,000 plus any additional equity it grew between the time the homeowner took out the reverse mortgage until the home owner dies.

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