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Thinking of getting a mortgage :: Comparative analysis of Reverse Mortgage and Others

Author: jessica
Subject: Comparative analysis of Reverse Mortgage and Others
Posted: Wed Aug 24, 2005 9:37 am (GMT 0)
Topic Replies: 0

Reverse and forward mortgages may have some common features in the sense that both help you remain the owner of the home and both require payment of the entire loan with interest. But they differ to a large extent with respect to their purposes as well as the mode of repayment.

A forward mortgage helps to build up equity, as there are monthly payments towards the repayment of the mortgage, which helps to reduce the loan balance. But with a reverse mortgage, there is hardly any payment on a monthly basis. Here the entire loan amount along with interest is paid back when the property is kept for sale, when the last surviving owner dies, or when he abandons the entire property.

Here is a list of differences to help you with the pros and cons of forward and reverse mortgages.

	Forward Mortgage	Reverse Mortgage
Purpose of loan	To purchase property	To generate cash.
Prior to closing, borrower has	No equity in the property	A lot of equity in the property.
At closing, borrower	Owes more and has less equity.	Owes less and has sufficient equity.
During the loan period, borrower	Pays monthly installments to the lender. Loan balance reduces. Equity increases.	Receives monthly payments from the lender. Loan balance increases. Equity gets reduced.
At the end of the loan period, borrower	Owes nothing Has sufficient equity.	Owes a large amount. Has much less equity.
Type of transaction	Falling debt, rising equity.	Rising Debt, falling equity.

Reverse Mortgage

For the full story see:
http://www.mortgagefit.com/discuss/about736.html
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