![]() ![]() Income Received This is the total of all the income you have received from the Reverse Mortgage. This is symbolized by the purple segment. Each month the interest expense is added to the balance of the loan. Because you do not have to make any payments during the course of a Reverse Mortgage, all interest accrues. Costs for the Loan The costs for a Reverse Mortgage are still there. To understand how the Reverse Mortgage looks in the future, you can view the same pie you did at closing: Value of the HomeĪgain, the whole pie depicts the value of the home, and the value may have increased. ![]() A Reverse Mortgage is costly in the short term, but a very good deal in the long term. In order to calculate the APR, estimations have to be made about how much cash you draw from the Reverse Mortgage. Other things equal, the lower the APR the better it is for the borrower. The cost of money (Interest Rate) is measured with the Annual Percentage Rate (APR). Equity is the net value of the Reverse Mortgage in your favor Your repayment of the Reverse Mortgage will never exceed the value of the home. These are the proceeds that you or your estate would receive at any given time, in the event you sell the home and pay off the Reverse Mortgage. ![]() The Equity represents the net balance in your favor at any time. Eventually you or your estate will have to pay back the cash and interest that you have been drawing from the Reverse Mortgage. With a Reverse Mortgage you continue to own your home it is yours. Whenever you use cash, your net worth is affected. Development of the Line of Credit over time Equity In most Reverse Mortgages the Line of Credit, if left untouched, grows over time. It helps you to manage unforeseen financial difficulties. Keeping part of the Reverse Mortgage as a Line of Credit is a wise decision when setting up a Reverse Mortgage. Liquidity is provided by the Line of Credit in a Reverse Mortgage. Liquidity is the amount of cash that you may access, if needed. Income received from the Reverse Mortgage Additionally, as long as you have a Line of Credit, you can always draw cash from the Line of Credit. If you have set up the Reverse Mortgage to provide you a monthly income, you will receive this amount of income every month. Over time you will enjoy the benefits of the Reverse Mortgage. Thus your equity is the light green (Line of Credit) plus the blue (Funds for Monthly Income) plus the grey reserves. You own the whole pie, but you owe the red, orange and dark green segments. Your Equity Your equity is the balance of what you own and what you owe. These are symbolized by the grey segment. There remain reserves that are not used for the Reverse Mortgage. Reserves The Reverse Mortgage does not cover the whole value of the home. Funds for Monthly Income If you would like to receive a monthly income from your Reverse Mortgage, then a part of the Reserve Mortgage will be reserved for monthly income. This is symbolized by the light green segment. Line of Credit The remainder of the Reverse Mortgage will remain at your disposal as a Line of Credit. Lump Sum Upfront The lump sum that you receive upfront is symbolized by the dark green segment. The closing costs are symbolized by the red and orange segments: Financing Fees and Insurance Fees. Costs for the Loan The costs for a Reverse Mortgage are financed through the Reverse Mortgage itself. Remember, as long as you or your spouse live in your home, you are the owner of the home. The following pie depicts the Reverse Mortgage:Īt closing of the Reverse Mortgage Value of the Home The whole pie symbolizes the value of the home. ![]()
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