A Reverse Mortgage is known as a Home Equity Conversion Mortgage and abbreviated as HECM.
This refers to a loan in which the lender agrees to lend a maximum amount within an agreed period, paid out in monthly installments, a lump sum, or a combination of the two, to the home owners.
This differs from standard home loans (the heloc) because the borrower is exchanging the equity in their home, in return for monthly payments FROM THE BANK, hence; reverse mortgage.
Reverse Mortgages are one of the lesser known forms of home equity borrowing and is a specialized type of home equity loan designed specifically to allow senior citizens to turn their home equity into cash without having to make monthly loan payments.
Why are these type of mortgages so popular and why is the number growing? Many seniors have homes with little or no mortgage, yet struggle to meet daily living expenses. These are referred to as "house rich, cash poor" households and that is exactly what a reverse mortgages was designed for.
The best way to understand the workings of a reverse mortgage is to contrast it with a regular (or "forward") mortgage. There are two main reasons for the name reverse mortgage:
* First, the monthly payment relationship between lender and borrower is reversed. With a conventional loan, the borrower (you) makes monthly payments to a bank or other lender. Contrast this with a reverse mortgage where the bank makes monthly payments to you.
* Second, with a conventional mortgage you pay off the debt over the term of the loan. As you make payments, the amount of your debt decreases and the amount of your home equity increases. With a reverse mortgage, the reverse occurs: your debt goes up and your home equity goes down. There are certain age requirements, and other restrictions, please contact me for further information about this FHA approved program.
Other options exist such as an annuity, this differs from a reverse mortgage, because it does not consume the equity in the property. For more information on these, or any of our financial services, please call or E-mail me today,
Dave Armer 253-359.6255 or
DaveArmer@Gmail.com