What is reverse mortgage & how is it different from mortgage?

A reverse mortgage is specifically designed for the needs of seniors and keeping them in their homes, whereas a traditional mortgage is not structured for that purpose.





With a traditional “forward” mortgage, all the money is borrowed up front and paid off over time with monthly payments. Over time the mortgage balance decreases as each monthly payment is made.





With a reverse mortgage the money is borrowed over time and is not paid off until the borrower either permanently leaves the house or passes it on to their estate. No payments are made until then. With a reverse mortgage the bank pays the borrower versus the borrower paying the bank. The balance increases over time with a reverse mortgage.





Reverse mortgages are not scams. Reverse mortgages are a good thing that helps many seniors stay in their homes versus prematurely going to nursing homes, etc. Reverse mortgages by the way are also almost entirely misunderstood and the same false information is repeated again and again.





All the borrowers must be 62 years old or older. Unlike traditional mortgages, credit is unimportant as no payments are being made. You also do not need income to qualify for a reverse mortgage as you do with a traditional mortgage, as no mortgage payments at all are being made. The reverse mortgage gives the borrower income versus using their income to make mortgage payments.





Reverse mortgages also allow for life estates and trusts to protect the equity in the home from Medicaid reimbursement, which is not allowed with traditional mortgages.





For more information go to: http://www.mtgmortgages.com/reverse_mort…What is reverse mortgage %26amp; how is it different from mortgage?
WE and CRA: Don't talk to people!





To the rest: it is not a scam and it is not used as a solution for excessively indebted individuals.





The reverse mortgage allows individuals to cash out their illiquid investment in real estate without having to sell their homes. THIS IS NO DIFFERENT than retirees dippind into their savings or retirement accounts.





Everyone else is generally right. I would just add one more bit of information. The homeowner can cash out his/her equity in a number of ways. As one poster stated, the owner can get the entire loan up front. The owner can also get a fixed or variable monthly payment. Alternatively, the mortgage can be set up so that the owner can take draws at his/her discretion during a period that is stated in the note.





In all of these cases, interest accrues while the loan is outstanding and both principal and interest are repaid at either a specified time in the future, when the home owner dies, or when the property is sold. The note will explicitly which event(s) will trigger a repayment.What is reverse mortgage %26amp; how is it different from mortgage?
A reverse mortgage is exactly what the word imply. A bank or financial institution pays you for your house. They are essentially buying your house, or equity in it. A mortgage is a loan that you pay back, at interest and secure with a house and or property. Both are types of loans that use your home as collateral. The reverse mortgage is a scheme that was recently devised to take advantage of the many senior citizens that own their homes outright and no longer need a mortgage. The selling point of a reverse mortgage is the extra money that many seniors become convinced that they need.
the bank pays you and takes your house when you die or they have paid you off
There are many types of reverse mortgages. But the major ones are: federally insured reverse mortgages, single-purpose reverse mortgages, and proprietary reverse mortgages. When the federal government provides insurance for the mortgage, it is called federally insured reverse mortgages. Single-purpose reverse mortgages, and proprietary reverse mortgages are financed by the agencies authorized by government, banks and financial mortgage companies. There are pros and cons for each of these mortgages. You need to consider them carefully before submitting your application.


http://simplify-your-debt.com/category/R…
A reverse mortgage is a mortgage where the bank pays you money based on the equity in your house. With each payment they make to you, the principal balance that is owed to the bank increases, plus the bank also adds interest to the balance. If you still have a mortgage on your house, the bank giving you the reverse mortgage will pay off any money that is owed, so that the reverse mortgage is the only debt secured by the house.





When you die or move out of the house, the mortgage is repaid out of the proceeds from selling the house. When these loans were initially introduced (about 20 years ago), if the proceeds were not enough to pay off the loan, then the bank was able to try to collect the additional amount owed from the homeowner or their heirs. Current loans do not permit that - the bank must eat the loss, so banks limit the amount of money they will lend.





These loans are restricted to homeowners who are at least 62 years old and have equity in their homes.





They do not impact your credit, since you do not make payments on them.
A reverse mortgage is basically where instead of paying a payment to cover the interest and principal, the payment is much less and any shortfall in the payment is added on to the end of the mortgage possibly.





As with most financial instruments, there are times when they are used with an appropriate overall plan where they make sense and other times where they do not make any sense at all for a person.





For example, if you have a good overall financial plan that includes a high yield, low risk investment, you may take the money out of your home using a reverse mortgage and invest it in this.





If the investment pays say $1500 a month and the mortgage is just costing $500 a month, your net gain is $1000.





If you then reinvest that, you could do the calculations to see how many years before you not only can pay off your entire mortgage but have a large balance in your investment as well.





That is just one example. It would depend on many variables and I would only suggest this if you have some reputable and valid advice from an attorney and financial planners.





It is probably not appropriate for the average home owner who is not an investor.
a reversed mortgage is one that lends you the money up front, for you, to get out of debt. You put up your house and property as collateral. The costs and fees of this loan are small, compared to a bank loan or second mortgage. The differences are, that neither you, nor anyone else, is allowed to try to pay back any amount of the loan until you have permanently 'vacated' the premises by dying or moving. Then it's left to you or your survivors to pay back the debt (with interest). Generally the company demands all of the money up front. The only way this is usually accomplished is, that, you sell the property to the highest bidder. They might also help you acomplish this for a large fee. The company then takes the amount of the loan with the interest attached and you or your survivors are left with little or nothing to show for it. In my opinion, a reversed mortgage is completely as ethical as a 'loan shark' company and only legal if you sign the contract. If your intent on getting a reversed mortgage, make sure you have a very competent lawyer to help you avoid some of the 'lay-man' traps that you would easily fall into. Ironically(again, in my opinion), if he/she were truly competent, then your lawyer would probably advise you to seek an alternative solution to your debt problem.
get a convential mortage instead, the Reverse will negatively impact your finances.