What Every Retiree Should Know About Reverse Mortgages
“What are my retirement plans or goals?” this is a question every person close to the retirement asks. Your aim may be to spend quality time with your spouse, children, friends, and other close associates – probably travel to a fantastic tourist destination or take up that dream career. You may even decide to buy that dream yacht or apartment. Whatever your dream may be, it is essential to plan strategically for life after retirement. Fortunately, there are systems in place to cater to your needs, one of which includes getting a reverse mortgage. This type of home loan provides you with the right amount of money to undertake any project. It comes with many advantages, including supporting your retirement income.
Understanding the Nitty-Gritty of a Reverse Mortgage
To qualify for a reverse mortgage, you have to be 62 years of age or above and be a permanent resident at your primary home. Once eligible, you can either access either of the two home loans:
- Private reverse mortgages
- Home equity conversion mortgages (HECMs) provided by the Federal Housing Administration (FHA)
Private lenders provide the regular reverse mortgages, whereas the federal government offers the HECMs. For the latter, you have to stick to the rules and guidelines that come with such loans.
- Your debt should not exceed the value of your home
- In an event where the lender or financial institution forecloses, you still have access to your funds
- Specific protections cover your significant other and relevant titleholders
Several reverse home loan products exist, including the “HECM for purchase” that allows single processing of a reverse mortgage loan contract and new primary residential home purchase. With this option, you can acquire a new home using the proceeds from the mortgage.
What Makes a Reverse Mortgage different from the Traditional Home Loans?
For standard mortgages, a homeowner is required to make monthly instalments to fulfil the terms and conditions. However, a reverse mortgage does the opposite. It puts money in your pocket with the immediate demand to repay the loan. There are three ways you can receive your funds: either as a lump sum, line of credit, or monthly payments.
The amount you can access from a reverse mortgage depends on the following factors:
- Equity of the home
- The homeowner’s age
- The balance on current home loans
- Interest rates
Additionally, the home should not serve rental or vacation purposes. Multi-apartment buildings are also eligible, provided that the owner resides permanently in one of the units. The individual has to cater to the property tax, home insurance, and maintenance costs to crown it all.
Increase Your Finances with a Reverse Mortgage
To some people, retirement means cutting back on all expenses or living on meagre incomes. However, you do not have to go through such an experience. You can put more money in your pocket by getting a reverse mortgage loan. Interestingly, the higher your home’s equity, the more funds you receive to undertake any goal or dream. If you are close to retiring, it is essential to consider this ideal option for your financial security.