Facts You Should Know When Applying for a Reverse Mortgage

 

*This is a collaborative post

As much as retirement sounds fun, the income you may get during this phase most likely pales to the actual income you earn currently from your career job – and this is what hits many retirees hard. To make matters worse, most retirees decide to remortgage their homes, thereby plunging themselves further into a pile of debts. Are there better alternatives to that? Of course. Rather than taking a traditional loan on your home that will leave you popping pills at night, why not opt for a reverse mortgage? This loan creates an additional stream of income for you while providing you with the luxury to enjoy the comfort of your home to the fullest. In this guide, I will show you what you should know about this financial haven. 

Enjoy Your Post-Retirement Life with Ease

If you have examined the traditional mortgage, you may have discovered something troubling about this loan; it puts borrowers on their toes. There is a rush of adrenaline to meet up with monthly repayment deadlines, as failure to do so can land a homeowner in hot water, worse yet, the foreclosure of the home. No one loves to hear such nightmarish announcement. But why put yourself on the spot, when you can easily procure a reverse mortgage. 

With a reverse mortgage, you can gain access to financial support without the fear of losing your home. And guess what? You do not have to repay your loan immediately. In actuality, you may not payback for as long as you like. However, bear in mind that the interest on the loan accrues with time. So, you may end up paying more than you initially borrowed. Another condition is that you have to pay your taxes, insurance, and home maintenance cost. Once these conditions are intact, you are good to go. There is no deadline for payment, except when you decide to sell your home. 

Accessing a Reverse Mortgage

To be eligible for a reverse loan also known as HECM (Home Equity Conversion Mortgage), you must be 62 years of age and older. Also, you need to be a legitimate homeowner; and not just that, your home has to be your primary residence. This property serves as collateral for the loan. The local lender or government agency will run a background check on your credit score, home value, and your credibility in meeting the conditions I discussed in the previous section. To conduct a comprehensive evaluation of your eligibility, the lender will use a reverse mortgage calculator. 

This calculator also determines the amount you can borrow from your current home market value. According to the law, you can not take the total value of your home as a loan. Once you are eligible for the loan, the lender will make your funds available. However, you can only access this money after clearing your current mortgage, as you can not have two or more home loans. After clearing the current loan, the remaining money is yours to keep, save, invest, and spend. 

 How Long Does a Reverse Mortgage Last? 

As I discussed before, you can defer a reverse mortgage payment for as long as you wish, provided that you meet all the conditions required of you. However, if you decide to sell the home, then you would have to pay back the loan. If the money from your home sale is insufficient to cater to the loan, the lender will forgive the outstanding debt.

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