Reverse Mortgage Perks to Ponder When You Retire

The moment you retire, you will realize that your income is way lower compared to what you used to receive. As such, you may need to take out a mortgage on your home to supplement the said shortage. But, you need to think again before deciding to do such thing. Keep in mind that a regular mortgage can be difficult as you need to pay it on a monthly basis. As such, you will have additional expenses every month. Fortunately, if you are at least 62 years of age, there is a better solution called a reverse mortgage. 

Here are some reverse mortgage perks to ponder when you retire:

A Reverse Mortgage Can Give You Ongoing Financial Relief

When you take out a regular loan on your home, you get a large sum of money, but you have to start paying it back incrementally fairly quickly. When you take out a reverse mortgage you can get a similar amount of money to spend, but you can do so without adding to your ongoing financial burden. Instead you will have ongoing financial relief.

A reverse mortgage is a long-term agreement. When you borrow money from a reverse mortgage lender, you are not supposed to pay any portion of it back right away. In fact, you are encouraged to take a long time to pay back the money you borrow. The money you borrow with a reverse loan will be owed back to your reverse mortgage lender, but only when you no longer live in your home. That means you can extend the length of your loan for many years. A standard home mortgage has a set deadline of when it must be paid back. That reverse loan flexibility can help you fund your retirement without financial fears.

You Can Get a Reverse Mortgage Fairly Easily

Another perk of a reverse mortgage is it is fairly easy to get, as long as you are at least 62. The biggest other requirement is you have to own and permanently reside in the home for which the mortgage is being requested. However, there are also some other minor requirements. For example, a reverse mortgage calculator must determine there is enough available equity in your home to make borrowing worthwhile. There are government standards in place detailing the percentage of home equity you can borrow. Since a reverse-loan application calculator factors in those standards, your lender will use one to come up with the amount you can borrow.

You must also be able to prove you can care for your home by paying your homeowner's insurance and taxes. Since the home will remain yours for the duration of the reverse loan and no scheduled payments to your lender will be required, you cannot miss a payment. Therefore, you cannot be evicted for non-payment as with a regular mortgage. However, you will retain all responsibilities of home ownership, including maintenance.

You Can Pay Off a Standard Mortgage with a Reverse Mortgage

Another perk of a reverse mortgage is you can use it to pay off a standard mortgage. However, you cannot have both on one home for any length of time. You must use a large chunk of your reverse mortgage funds to immediately pay off the regular mortgage. Then any remaining funds will be given to you to spend how you wish. The advantage of taking out a reverse mortgage to pay a standard mortgage off is you will no longer have ongoing scheduled mortgage bills to pay.

The Reverse Mortgage Does Not Have to be Paid Back

When you take out a reverse mortgage, another perk to consider is you may not have to pay it back. If you stop living on the property, the balance you owe must be paid. However, the property can be sold to recover some or all of that balance, so you do not have to pay it out of your own pocket, as long as you don't want to keep the home in your family. Other assets, such as vehicles, are not part of the reverse mortgage agreement and cannot be sold by the lender. Therefore, if there is still a balance owed after the sale of the home, the remainder will be ignored by the lender.

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