Watch a lot of daytime TV? Game shows, reruns of 1970s sitcoms, talk shows...all punctuated by commercials for diabetes supplies and reverse mortgages.
Reverse mortgages allow older homeowners to draw an income by cashing in the equity they have in their homes. Under a normal mortgage, you pay the bank a certain amount every month and, over time, build up equity in the home. A reverse mortgage involves the opposite process: a company sends you a check every month, with your equity diminishing over time.
Most of these reverse mortgages fall into a category called "home equity conversion mortgages," or HECMs. These come with a lot of guarantees and regulatory scrutiny. They're closely watched by authorities. However, there's another type: the proprietary reverse mortgage. It's the Wild West of the industry. These deals don't have the same tight controls as the HECMs, which creates more risk. However, they allow more latitude.
The main reason someone would choose a proprietary reverse mortgage relates to the size of the loan. HECMs have a cap on the amount. But since the proprietary version exists outside the regulatory framework, those deals can have any amount.
Got a $20 million house, but for some reason need a steady monthly income? A proprietary reverse mortgage might be for you.
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Finance: What is a Mortgage?345 Views
Finance allah shmoop shmoop What is a mortgage Well people
a mortgage is just dead it's alone but one with
special tax treatment For most people simply put Any interest
you pay on a mortgage to buy a home is
tax deductible Morty morton's inputs down a hundred thousand bucks
to buy a home that costs four hundred big ones
his mortgages three hundred grand at five percent interest per
year So that's fifteen thousand dollars a year he pays
to rent the money from the bank which he uses
to buy his dream home with the loop de loop
waterslide Morty earns one hundred grand a year and pays
tax on his last fifteen thousand of earnings soas faras
The irs is concerned since morty can deduct his fifteen
thousand dollars in interest against his earnings he does not
in fact earn taxable wages of one hundred grand annually
Instead he earns taxable wages of eighty five thousand dollars
a year Essentially with government is doing is sharing in
some of the cost of renting the money Taub i'm
ortiz home well why would the u s government be
so charitable Well because home ownership has been integral part
of the american dream since the u s of a
i po'ed in seventeen seventy six easy access to mortgages
and then home buying can be a hugely beneficial asset
In the vast majority of cases homes create family stability
a store of wealth and tax dollars for local schools
in the form of real estate taxes So don't feel
bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello
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