Helpful Reverse Mortgage Info for Retirees
When you reach retirement, you probably want to retire in style. You may have visions of taking dream vacations or spending a lot of time on a favorite hobby, but what happens if your finances do not allow those visions to become a reality? If you are 62 or older and struggling financially, you may be considering taking out a home loan. A reverse mortgage is a home loan designed specifically for you and only available if you are at the age of retirement. This information about reverse mortgages will help you decide if one is right for you.
The Two Types of Reverse Mortgages
When a government-sanctioned program provides a reverse mortgage, it is usually known as a home equity conversion mortgage. When it is provided by a private lender, It is simply called a reverse mortgage. The two terms mean the same thing, more or less. Both types of loan have some government regulations attached to them. For example, a reverse mortgage calculator has to be used when you apply because only a percentage of your home equity can be borrowed by law. First, the value of your home must be calculated based on current rates, then the reverse mortgage calculator must apply current government regulations to see how much you can borrow.
Reverse Mortgages Versus Standard Home Loan Payments
One of the biggest differences between reverse mortgages and standard home loans is in their payment terms. For example, if you take out a traditional mortgage on your home, you must make restitution to the lender on an ongoing basis at scheduled times. Those payments can actually increase your financial problems when you retire because they will create additional ongoing bills you have to pay.
When you work with a reverse mortgage lender, the situation will be entirely different. You will not owe any portion of what you borrow back right away. You also will not have regularly scheduled repayments to make. In fact, there will be no established loan period. Instead, you will only have to pay the reverse mortgage when you relinquish home ownership permanently. Moving off your property will trigger the calling in of the entire loan balance.
How to Qualify for a Reverse Mortgage
There are several qualifications you must meet to get a reverse mortgage. You must own and permanently live in the home in question. Additionally, you must be at least 62 years old to apply. If you get the mortgage you will retain ownership of the home. Your reverse mortgage lender will check to make sure you are capable of paying the taxes and insurance necessary to do so. That may involve passing a credit check.
The home itself must also qualify. It cannot be a vacation home or a rental home. However, it can be a multi-apartment home, as long as you and anyone else signing the loan agreement live in one of the apartments permanently. Additionally, the home value must be high enough to make a reverse mortgage worth it and there cannot be another loan already on the property. If there is, you can still get a reverse loan, but you must use some of the funds from it to immediately pay the full balance of the first loan.
Getting and Spending Your Reverse Mortgage Money
If you qualify, you can get your reverse mortgage money any way you want. For example, you can request monthly installments from the lender. Having an extra monthly income may help you pay ongoing costs when you lose your working income at retirement time. Alternatively, if you have a major financial setback or expense, you can ask for one large payment. In some cases, you can set up a line of credit to draw on only when you need to as well.