Things to Know Before Applying For a Reverse Mortgage

Posted June 10, 2020 by in Lifestyle
brown and white wooden house

A financial injection at retirement age is something that most people would welcome. A reverse mortgage is a reliable and very stable solution to funding retirement, but the benefits can be bewildering. And what about a traditional mortgage – what happens if you have one, but want the other? I am here to offer you some clarity on the reverse mortgage.

Reverse vs Regular: what’s the story?

The basic loan conditions of a reverse mortgage are simple: you need to be the primary homeowner, and you need to live in your house for the duration of the loan. Unlike a regular loan, there is no need to repay it within a stipulated period. In fact, as long as you remain compliant with the loan conditions, you do not need to pay back the loan until you decide to ever leave the house.

Plotting the Way Forward With A Reverse Loan Calculator

This tool takes several aspects about your home into account, such as the age, condition and location. Determining the value in this way allows your lender to calculate the total value of your house, and what percentage of that you would be able to access in the form of a reverse mortgage.

Many Payout Options, Many Advantages

A reverse mortgage has a useful function, in that you can choose how you would like to receive your loan payouts. It could be a monthly payment, like a salary, to help you with day-to-day living costs. You could also choose the option of receiving it in one large lump sum, to help cover a sudden, large expense. The third option is to use your loan as a line of credit, where you can access the exact amount you need, as and when the need for it arises.

Home Ownership and the Reverse Mortgage

A condition of the reverse mortgage is that you are required to be the main homeowner, and to live in the house as your primary residence for the duration of the loan, in order for the loan to be valid. As long as this is in place, you cannot be evicted for non-payment, as repayments to the reverse loan are not scheduled. As long as you remain up to date with related expenses, like taxes and maintenance costs, your loan is safe.

However, should you ever decide to leave the home, it may not be passed on to your family unless the balance of the loan is repaid to the lender. If any part of the balance is left unpaid, the costs will be recovered through the sale of the house.

And if I Already Have a Standard Mortgage?

A reverse mortgage can be used to eliminate all your outstanding debt on a regular home loan. If you pay off your initial mortgage with a reverse mortgage, you free yourself up to pay the balance far later than you would have. The only important thing to know is that you cannot maintain both loans at once.