How Reverse Mortgages Act as Financial Aids for Retirement
We all plan to have amazing retirements, but how much planning is enough? Can you be able to meet unforeseen circumstances, including emergencies? Most people love the sound of retirement, but then, they are scared of not being able to meet certain needs as before. In search for a secure post-retirement financial safety net, you may have come across several investment and saving plans. But have you heard of a reverse mortgage? In this guide, I am going to explain to you what this term is all about and how you may find it useful once you retire.
What is a Reverse Mortgage?
Reverse mortgage helps to meet the financial needs of people, 62 years old and above, who have properties that serve as their place of permanent residence. So, what does this loan do? First off, you can use this reverse home mortgage to pay off your existing home loan. The remaining money after payment is yours to keep. You can decide on which loan payment option suits you best, provided that you reside in your home, pay your property taxes and insurance, and maintain the property.
How Much Mortgage Can You Take?
Unlike your typical home loan where you have to cope with monthly repayments, you can decide to pay back on your reverse mortgage anytime you want, as long as you meet the requirements discussed in the previous section. So, imagine receiving money for procuring a loan on your home – an option traditional mortgages do not provide.
There are several options to receiving a reverse home mortgage:
• As a lump sum – for individuals who have multiple needs to meet at once.
• As a line of credit – for individuals who may decide to take a loan whenever they want.
• As monthly payments – for individuals who need steady post-retirement paychecks.
You can enjoy the wide range of flexibilities a reverse loan provides, including paying off your outstanding mortgage.
So, how much is available for you to borrow? There are several factors to consider, some of which include your home’s current value, the borrowing cap based on the federal law, and your credit worthiness. A reverse mortgage calculator will come in handy at this point. Laws may change from time to time. Hence, it is best to consult a local lender on this subject. If you want to calculate your eligibility for this loan, there are several reverse mortgage calculators online.
Are There Other Costs to Consider?
It is important to know any necessary costs you may have to pay when getting a reverse mortgage. To begin with, you have to settle your current home loan, if there is any. Your lender will ensure this, before releasing the remaining part of the loan to you. Another cost you have to deal with is the loan’s closing costs – this is similar to the standard mortgage. Also, cover other outstanding fees, and then, you can spend what is left on your personal needs.
Interestingly, you do not need to commence repayment immediately. But bear in mind that the interest on the loan builds up over time. Hence, you will be paying more than you borrowed. The only time you can repay your loan is if you decide to sell your home and relocate.
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