This is basically where the lender pays the borrower instead of the borrower paying the mortgage to the lender.
You may be wondering how this works. Basically the lender will pay you either a lump sum or monthly payments determined by the value of the home and how old you are. The more valuable your home and the older you are, the more money youll be able to get.
The reverse mortgage comes due at the end of the permanent occupancy of the senior in the home. When you move out of the home permanently, the reverse mortgage comes due.
One of two things may happen at that point in time. The home may be refinanced with a regular mortgage. This works well if the heirs or seniors decide they want the home to stay in the family or be able to have a say in who gets the home.
If the seniors or heirs decide to walk away at that point in time without arranging for refinancing with a regular mortgage, the lender or bank will take ownership of the home.
The reverse mortgage is a non-recourse loan which means that the amount due will not exceed the appraised value of the home.
Reverse mortgages require counseling by a 3rd party provider specifically so that seniors understand what the consequences are as well as the advantages of reverse mortgages. These 3rd party counselors are also required to explain alternatives for funding for seniors 62
