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MBA Urges Regulators To Avoid Invoking Suitability Standards
The Mortgage Bankers Association (MBA) recently made a preemptive strike against what it obviously perceives as the next threat against the mortgage industry - "suitability standards." Read more...

 

Some Basics On Reverse Mortgage Loans

A reverse mortgage is a type of loan that is only available to senior citizens who have plenty of equity in their homes, but not enough money on hand. It is literally a mortgage in reverse, hence the name of reverse mortgage, where a homeowner is able to access equity locked in their home through a special loan from the bank. This money will be paid out either in monthly installments or all at once and there are no monthly costs for the borrower to pay, and the loan becomes mature only when the property is sold or when the homeowner dies. At that time, all interest and fees associated with the loan will be due in one lump sum.

For seniors who need money for day-to-day expenses like medications, bills, or travel funds, a reverse mortgage can prove to be a great tool.

There are other home loans available of course, but these loans require monthly payments, which can be difficult for some seniors already strapped for cash to afford. This is one of the reasons that a reverse mortgage can be prove to be a good fit for some people; not only can they free up some cash from their home equity, but they can do so without adding to their monthly expenses.

On the downside, because the money for this type of loan comes out of the home equity, a reverse mortgage will affect the amount of inheritance that your beneficiaries will receive. When the property is sold, the lender will take back all monies owed to them, leaving what's left over to the borrower. The more money taken out on a reverse mortgage, the less money will be left for the borrower's heirs. Fortunately, there is a limit to how much money can be owed and when the property is sold, if the proceeds from the sale are lower than the amount still due on the loan, the bank will eat the difference.

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