Welcome to professrsavings.com, we teach finance basics.
Today we will teach you easy ways to learn reverse mortgage in about two minutes.
Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.
Let’s jump right in.
A reverse mortgage aka a home equity conversion mortgage (HECM)can be a source of retirement income for homeowners with few assets aside from their primary resident.
Let’s say that Professor Savings hit’s retirement age at 65, the minimum age of qualification.
A reverse mortgage allows him, a home owner, who is at least 65 years old and owns a home to be free and clear to borrow money against the home’s value.
So the main point of a reverse mortgage is that the total loan amount plus interest will never be more than value of the home during loan period.
The loan amount to Professor Savings is calculated by the home’s value and the homeowner’s age.
Breaking it down, older homeowners and homes that are more expensive receive larger reverse mortgage amounts.
There are few ways to disperse the payment such as a lump sum or a month check.
The main catch is that reverse mortgages tend to have a lot of fees. These may include closing costs, service fee, and mortgage insurance.
Also be warned. Reverse mortgages can make it difficult to sell the home, rent out the home, or move out.
Lastly, Professor Savings’ home cannot be passed down to his children until the homeowner’s heirs in this case his children have enough money to repay the loan without selling the house.