Reverse mortgages are generally available only to homeowners who are 62 years of age or older. The purpose of the reverse mortgage is to allow the homeowner to turn the equity in their home into cash while retaining the ownership of their home. This is often used by seniors who may find themselves real estate rich and cash poor. This is not necessarily a route that every senior should take. It is strongly advised that you consult with an attorney who deals with reverse mortgages before you get involved in placing a reverse mortgage on your home.
Interest on Reverse Mortgages
Interest on reverse mortgages is compounded. This means the homeowner ends up paying interest on both the principal and the interest which has already accrued each and every month of the loan. Compounded interest rates are different than the simple interest rates. Compounded interest rates increase the amount of the loan and cause it to grow at an increasingly faster rate than the standard mortgage. In most cases the large part of the equity in the home ends up being used up by the reverse mortgage.
Non-Recourse Loans
Reverse mortgages are non-recourse loans. This means when a homeowner defaults on the loan or the loan cannot otherwise be repaid, the lender cannot look at your other assets or the homeowners’ estate assets to meet the outstanding balance on the mortgage loan.
The law firm of Schlissel DeCorpo LLP has been helping families deal with mortgage and foreclosure problems for more than 30 years. We can be reached at 718-350-2802, 516-561-6645 or 631-319-8262 or by e-mail at info@sdnylaw.com.
