What phase of your life is the best time to live freely and do whatever you like? If it’s not your childhood days, then it is your retirement age. During your early years, you may have all the responsibilities shouldered by your parents or guardians. But when you retire from your job or career, you are left to fend for your needs without enough corporate support. It gets worse if you don’t have any means of survival. But here is the good news – especially for homeowners; you can be financially secured after retirement, and one way to do that is through a reverse mortgage.
Understanding Reverse Mortgages
For clarity, a reverse mortgage is not the same as your traditional home loans. With the standard mortgage, you must repay your debts consistently or risk foreclosure. This requirement puts you under pressure to meet up with the lender’s terms. Hence, it takes money from your pocket. In some instances, especially for those under the age of 62, a mortgage refinance might be a more realistic option. You can check out this mortgage refinance guide to determine if that is the right choice for you. On the other hand, a reverse mortgage provides financial security without you losing your home. A traditional loan may span five years or more, depending on the deal between the lender and the borrower. As a result, it is a short-term loan.
However, a reverse mortgage is long-term as it is open for as long as you want. But there are some things you should know. For one, you must be a permanent resident at your primary residential home. There are no long vacations (a year or more). So, as long as you reside in your home, the loan remains valid. If you decide to relocate or can no longer meet the recurring costs (home insurance, property taxes, and maintenance), the loan becomes due.
Processing a Reverse Mortgage
Before you contact your lender, you have to ask this question, “Do you need the loan?” If yes, how much do you need? Not all demands require that you take a loan, especially when they are not essential or where there are alternatives. However, if you need one, then a reverse mortgage is an ideal choice. But you have to be of age 62 years and older to qualify for this mortgage.
“Is that all there is to it?” you may ask. Of course, not. The lender will determine your creditworthiness using a reverse mortgage calculator. Understand that you can’t borrow the total equity of your home – a federal law. As a result, you have to be sure that your home is worth taking a loan; or else, you may have to look for an alternative.
Receiving Your Funds
Once you meet the prerequisites for obtaining a reverse mortgage and pay off outstanding loans and closing fees, your funds will be available. You can set up your payment as a line of credit. This option works like a credit card. As such, you can apply for a loan whenever there is a need. But if you have several immediate expenses to meet, you can collect your money in a lump sum. This payment system will enable you to cater to those pending bills immediately. Finally, you can receive your funds as monthly payments – consider this your post-retirement paycheck. It helps you map out your monthly budget and meet all financial necessities.
I hope that helps you navigate a little better in the world of reverse mortgages. What have your experiences been?