Reverse Mortgages 101: What is a Reverse Mortgage?
A Reverse Mortgage or HECM (Home Equity Conversion Mortgage), as it is also known, is just what it implies. It is a mortgage that works in reverse. ?You see, a ?forward? mortgage is what you?re already familiar with. It?s where you go to a bank and borrow money to purchase a home or refinance an existing mortgage.
With a forward mortgage you begin immediately to make monthly payments. Often these will last 15-30 years and are divided between:
- The Property Taxes
- Hazard Insurance and Flood Insurance
- Mortgage Insurance
- A small portion to reduce the principal balance
- And finally the interest that has accrued over the past month
A Reverse mortgage?is essentially just the opposite. With a reverse mortgage there is no monthly payment and the home owner typically pays for the taxes and insurance on their own. The only thing to deal with is the monthly accrued interest and mortgage insurance, both of which are added to the balance of the mortgage.
As you can see there isn?t any magic involved. You don?t make payments and the bank will paid the principal balance and interest in the future when you pass away or otherwise pay off the loan.
Because of this structure there are incredible benefits with a Reverse Mortgage, the most notable are:
- NO monthly payments for life(meaning the life of the homeowner)
- Home Equity Line of Credit for additional cash reserves
- Access to a large lump sum of money from the equity in the home
Reverse Mortgages are quickly gaining in popularity across the country. Utah and especially St George, Cedar City and other areas in Southern Utah are following suit. People are beginning to recognize that they have unmistakable advantages for those who qualify. Though they may not be the right loan for everyone they can truly be a life changing opportunity for most.
That’s Reverse Mortgages 101!
If you?re on the fence about whether a HECM Reverse Mortgage is right for you, please call me for a no obligation, no pressure consultation to look at your options and answer any questions you have about this product.
President – Reverse Mortgage Specialist
Heritage Reverse Mortgage
Heritage NMLS #1497455 Trevor?s NMLS #: 267962