Everybody looks forward to retirement as a time to do the things they couldn’t do while they were working. However, with work activities coming to an end, the supply of money running thin is often a very prominent concern after retirement. Luckily, there are several solutions to getting some financial flexibility back into your life after retiring, so let’s debunk some of the misunderstandings and get behind what a reverse mortgage really is.
Why is it not a normal loan?
The most prominent difference between a reverse mortgage and a regular home loan is that you will not be bound by regular bill payments as soon as your reverse loan is granted. This frees up more money for you to use immediately, without worrying about the repayment process.
Why is it worthwhile?
An excellent benefit and probably the standout feature of a reverse home loan is that you are required to stay in your house for the loan to be valid. There is a dual benefit in this: firstly, because you are required by the loan regulations to live in the house, it is impossible for you to get evicted unless you contravene any other parts of the loan agreement. Secondly, because there are no regular scheduled repayments, it is almost impossible to default on your repayments to the bank or other lending institution. But before you get carried away, remember that your loan does not take away any other responsibilities of home ownership, such as taxes, regular maintenance costs, and remaining solvent for the duration of the loan period.
Can I apply?
As with any loan, the first and most important step is to find out what amount you are eligible for. Because your loan is based on the inherent value of your house, it stands to reason that the higher the value of your house, the more money you could get access to in a reverse home loan. Federal laws prohibit you from borrowing the full value of your house equity, so the higher the value of your house, the higher the value of the percentage you can borrow.
In order to qualify for a reverse home loan, you need to be at least 62 years old. For this reason, a reverse home loan is often referred to as a retirement loan. A comprehensive background and credit check will be performed on you before the loan can be granted, and in addition, you need to be the full-time resident and legal owner of the property. If you own a property with multiple dwellings on it you will be required to live in one of these dwellings as your permanent residence to qualify for a reverse mortgage.
If your house is already subject to an existing home loan, this amount will have to be settled first before you will have access to the balance of the funds available in your reverse home loan. Once any outstanding settlements have been taken care of, you will be free to enjoy the money made available to you by your loan without stressing about regular loan repayments.