Are Reverse Mortgages for You?
You might already know there are retirement home loans to help you when money is tight.
They are called reverse mortgage.
Applying for one is potentially a great way to make your retirement less stressful. It can allow you the financial freedom to do what you want with your golden years.
But there are things about reverse mortgages you must understand to make sure you want to enter into such an agreement.
Here are some top reverse mortgage considerations.
Reverse Mortgages Are “Free and Clear” to a Point
Reverse mortgages are frequently touted as “free and clear” because they allow you to borrow funds and not have a mortgage bill to pay.
That is true.
However, it does not mean you never have to repay the funds. You can borrow them and not pay them back for many years.
Eventually you have to make restitution or allow the sale of the property.
Reverse Mortgages Do Not Have the Same Risk Factors as Standard Mortgages
A standard mortgage is a potentially bad choice when you are retired because it comes with scheduled repayment requirements.
Missing even one repayment deadline can lead to possible eviction from your home. On a retirement income, you may be unable to afford that added ongoing bill.
If money is an issue, “is reverse mortgage for me?” is a good question to ask yourself.
A reverse mortgage may be a better option for you than a standard home loan because no schedule of repayment exists to follow.
Since there is nothing you can accidentally miss, you cannot lose your home due to not making a payment on time.
Therefore it is a safer option.
However, There Are Some Risks to Consider
It is important to note that there are risks associated with reverse mortgages. They simply are not the same risks as those associated with regular home mortgages.
For example, filing for bankruptcy violates a reverse mortgage agreement.
So does failure to maintain primary residence at the home listed in the agreement. Also, if you cannot pay the balance by the time you leave the home, it can be sold so the lender can recoup losses.
Reverse Mortgage Borrowing Options Are Diverse
A good thing about a reverse mortgage is it offers diverse borrowing options. For example, you can set the agreement up like a credit card.
Then you can borrow any amounts you want until the full balance available is reached.
Alternatively, if you need cash fast, you can ask for one big payment one time. However, monthly installment payments is the most popular method for receiving the cash.
They let you cover living costs like utility bills or any other financial needs you want while funds last.
Figuring Out Your Reverse Mortgage Eligibility
It is a common misconception that anyone over 62 can get a reverse mortgage. While true that you must be 62, you and the home itself must also be deemed eligible in other ways.
For example, the home must have a high enough value.
You must also prove an ability to financially maintain it. Additionally, if a loan on the property already exists, you have to agree to use the reverse mortgage to pay it before spending any funds on anything else.
Deciding to Apply for a Reverse Mortgage
Deciding to apply for a reverse mortgage is not a decision to be made in ten minutes. It requires long-term thought and a great deal of consideration.
The best option is to seek advice from a third party reverse mortgage expert.
You May Also Like:
- Mortgages: The Devil is in the Details
- Say Goodbye to Your Mortgage Sooner
- Ways You Can Save Money as a Homeowner
- Should You Save or Invest Your Money?
Sitting down with such an expert can help you learn details of which you may be unaware, both good and bad.
Then you can make your decision in a more confident manner, whatever that decision may be.
Do you have any tips about reverse mortgages?
Let me know, til then–cheers m’deres!
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I am a girl from the UK with a lot of thoughts. Not a fan of the online world but, every once in awhile I let my thoughts out. I write about life, finances, home design, and more. Hoping to inspire people every day. I’m a writer, a reader, and an old soul.