reverse mortgage amount

Reverse Mortgage Amount. Reverse Mortgage Alabama. Why is the reverse mortgage amount so low? The reverse mortgage is meant to allow you to live in your home, mortgage payment free for the rest of your life. The equity in the property is always yours. So while you are allowed 60% now, the other 40% that remains in the equity is yours as well. You can sell the home anytime you wish and that equity would be yours.

HUD doesn’t buy your home. The reverse mortgage is a loan. Just like any other loan, you borrow money and accrue interest on the funds you borrow. The difference is that you never have to make a payment with a reverse mortgage so the balance goes up instead of down. With any other loan, if you borrowed money, you would make a monthly payment that would go toward principal and interest or interest only.

Since you have no payment to make, the amount you owe will rise over time. If you were to borrow the 60% and stay in the home for many years, you will accrue interest on that loan and the balance will be substantially higher than when you took the loan out.

Some people are a little shocked at seeing the balance rise but when you compare it to a regular loan, it’s not really that different, only when you make the payment. On a standard or forward loan, you’re making monthly payments and so if you look at a Good Faith Estimate of a 30 year fixed rate loan and you see that amount of the total payments you paid over that period, it adds up to quite a bit more than you borrowed.

The reverse mortgage is the same way but the loan balance is rising rather than you making all those payments for the next 30 years giving you funds to live on or use however you choose instead of paying them to the lender.

And because there is never a prepayment penalty with a reverse mortgage, borrowers who wish to make payments monthly, quarterly, annually or just whenever they wish can do so at any time up to and including payment in full with no penalty.

But because most people choose not to make any payments (after all, that’s why most people choose the reverse mortgage, so they don’t have to make a payment), no one knows how long you will stay in the home, how much you will borrow or how much interest you will accrue. For this reason, borrowers are only given access to a portion of their equity in the loan proceeds. But as I stated, any and all equity remaining in the property still belongs to you or your heirs.