If you are finding it hard to understand exactly how a reverse mortgage works, and whether or not it is a good thing for seniors, or a bad thing, simply look at the options and watch the equity.
Seniors have a choice of taking cash from a reverse mortgage as a lump sum, as a monthly payment, or leaving the cash in a line of credit. The monthly payments can be taken as a Tenure monthly payment (payments for life), or as a Term monthly payment (The senior selects the amount they get paid). It is also important to note that the senior has the choice of any of these options, or a combination of any of these options.
Once you have decided which option you choose, simply watch the home equity. The home equity is listed in the “Remaining Equity” column of every reverse mortgage amortization schedule.
Just like every other mortgage, a reverse mortgage has an immediate impact on the remaining equity of the home. Take out a little, your equity goes down a little. Take out a lot, and your equity goes down a lot.
The important factor is what happens to your home equity over the long run. This is what all the negative press about reverse mortgages claim. They all say that you lose your home in a reverse mortgage. Actually, the opposite is true. When you take a look at the remaining equity column over the life of the loan, you will see that in most cases the remaining equity actually grows. That makes this loan is the best product available to a senior in the mortgage industry.
Why does this happen? It happens because the interest rate is tied to the treasury bill. It is incredibly low. Even though you are not making a payment, your homes appreciation will typically grow faster than the loan interest rate.
Bob
bob@az62.com
www.az62.com
623-214-6663
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