|Re: Reverse Mortgage Calculations|
Message #3 Posted by bill platt on 5 Mar 2004, 10:08 a.m.,
in response to message #2 by kw
This seems like a VERY bad deal! Like, 120 * $448.18 = 53,781.60. If your house appreciated 8% over the 10 years, then it would be worth $108,000, so you are only getting 1/2 of the house's value. (In the long term, houses do not appreaciate 8% per annum, but if it was 8% per annum, then your 100,000 house would be projected to be worth $215,892 in 10 years, which would mean you would be getting only 24.9% of your house's projected value).
Seems like a great deal for the bank--they pay only $53,781.60 to aquire a property worth $108,000 or more. Or, taking the time value of money into account: if money is worth 6% per year (what they get for a mortgage), then the bank will have spent in principal and "lost" interest, $73,937. So, at the end of 10 years, the bank sells the house for $108,000 and makes (in real terms) $34K!
Am I right, or have I completely missed something here?
What if you "overstay your visit" (live longer than 10 years). Do you get to live in your house, do you keep receiving payments, etc?
Edited: 5 Mar 2004, 10:10 a.m.