How Do Senior Reverse Mortgages Differ From The Traditional Ones
The senior reverse mortgages get their life bloods from the conventional mortgages
. The conventional mortgage adds the equity of the home every time, when the back payment happens. It is a kind of the saving program, where a borrower will buy his home piece by piece.
1. The Back Payment.
The whole reason, why the senior reverse mortgages are on the market is the benefit, that they can release cash money to a senior from the equity of the home. The senior reverse mortgages are loans, which are always taken against the equities of the homes.
Because the target is to add the amount of the disposable cash money of the senior, there are no monthly back payments. With the conventional mortgage the borrower will pay back every month, but with the senior reverse mortgages the loan capital and all the costs will be paid back, when the loan will be closed. This happens, when the last borrower will sell the house, move away or die. Then the house will be sold and the costs will be paid from the selling price of the house.
2. The Home Ownership.
There is a lot of fears on the market, that the lender can take the ownership of the home. This is not true and the borrower will stay as an owner during the whole running time of the loan. Of course he has the duties. He has to pay the insurances and the property taxes and to keep the property in a good shape.
3. The Amount Of The Equity.
The conventional mortgage loan does not eat the equity of the home, but will add it every time, when the back payment happens. The reverse mortgage will eat this equity every time, when the lender will pay to the borrower. However, the borrower will never owe more than the equity of the home. His other assets will never be used to pay the reverse loan. If the house selling price will not cover the whole sum of the capital and the costs, the compulsory mortgage insurance will be used.
4. Actually They Will Cooperate.
This two mortgage types go hand in hand. The reverse loan cannot work, if a senior has not paid the usual mortgage loan and saved capital into the home equity. So when the saving has happened, when his salary was bigger, it is very natural that a senior wants to use this money to pay the increased medical bills, for instance.
Why did I write this short article? Because there has been confusions every now and then about these differences. These both loans are mortgages and for some people it has been difficult to understand, what does it mean, when the other one is a reverse loan. How a senior can take a loan without the compulsory monthly back payments? How a lender will pay to a senior according to the schedule a senior has made?
by: Juhani Tontti
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