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| Question |
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Are reverse mortgages the next sub prime fiasco?
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| By
trojans |
Posted on
02/12/08 Total Answers
4 |
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| Answers- |
| No they are ran by the Government. Its a one time closing and you can stay in your house until you die. They cant change your rate (there is no rate). You just take cash early for your house. They cant kick your out because you didnt make a payment (there is no payment). The problems we are having are night and day with reverse mortgages.
Now if you actually are asking about Neg Am mortgages thats another story. But reverse mortgages wont affect anybody. Well other then maybe the kids that wanted the 300K equity in the home when their parent died instead of letting them use their savings for their own needs. |
| Answer by :
financing_loans On Date
2008-02-12 14:55:12 |
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| If you don't understand them, please don't make ridiculous claims. Educate yourself otherwise you look stupid. |
| Answer by :
TPMG On Date
2008-02-12 14:57:13 |
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| Maybe. The thing is, what this thing called a reverse mortgage is, is a financial instrument, which is an asset in exactly the manner as a mortgage is for the bank and a liability for the home owner as it acts to increase the amount of debt the people owe the bank. Consider a regular mortgage. It is a loan with the house as collateral. The bank buys the house and allows me to pay them in increments over time, paying interest on the money I still owe. On payment #2 of 360, 99% goes to interest and 1% reduces the balance still owed. On payment #359 of 360, the opposite holds, 99% toward the balance and 1% for the interest. Now, for what happens with the reverse mortgage... It is like starting out on payment #359 and working backwards toward payment #2, Each time I withdraw money, I turn over some of my equity in the house back to the bank. For this, I pay the bank a fee in addition to still owing interest on the unpaid balance.There is no payment due with the reverse mortgage, so you can't default and lose your house. They can not force you to move out or sell, but you owe the debt. And in theory, you can take money out until you reace the equity value of the house, and if you live long enough, you could actually get more out than you put in. This makes NO sense to me. I see no logic in incrementally selling your house to the bank and not only owing interest on a balance that is ever-increasing, but also paying them a fee for the privilege of doing so. Like a mortgage, this should have a fixed interest rate and a fixed number of payments which means a fixed total value. My present mortgage is 7.5% for 15 years, fixed. I have a payment schedule for all 180 payments. With a reverse mortgage, the problem arises at the end of the term when the amount you have taken out equals the equity. What happens then? At this point it is unclear. They can not force you out of the house, nor force you to sell, but do they still allow you to take money out every month? There is a lot to consider here, since all you are really doing is putting yourself incrementally into more and more debt which will eventually be paid back from your estate when the house is sold after you die, leaving your heirs with nothing... |
| Answer by :
rowlfe On Date
2008-02-12 16:01:49 |
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| No. Not even similar. A reverse mortgage is getting payments from a lender for the equity in your home. Unlike a home equity loan, you dont withdraw a fixed amount to pay back over time. It is a way for retirees to supplement their incomes.
The borrowers do not have to pay the money back as long as the House is their principal residence. Lenders get their money, plus interest, when the home is sold. any remaining equity goes to the borrowers heirs. |
| Answer by :
MikeHaleHomes On Date
2008-02-12 17:06:23 |
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