There are a lot of benefits of retirement. One you may not be aware of is the availability of reverse mortgages. They are special home loans you can only get when you are at least 62 years of age. If you are having trouble affording your expenses when you retire or just want extra cash to make your retirement more fun, a reverse mortgage can give you that extra money. Here’s how.
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When You Get a Reverse Mortgage, It Pays You
If you have been thinking of taking out a mortgage on your home, the thing stopping you may be the idea of having to pay back that mortgage a bit each month. The last thing you need is an extra bill when you are already financially troubled. But, when you make a deal with a reverse mortgage lender, the loan agreement will be completely different. You will be the one receiving the money for as long as there is money to receive.
How Much You Can Borrow with a Reverse Mortgage
Your ability to take out a reverse loan on your home will be largely determined by the total value of your home equity. You cannot borrow the total equivalent of the equity, so a reverse mortgage calculator will be used to determine the total amount of the loan. The use of such a tool is necessary because of factors like federal laws regulating how much you can borrow. After the reverse mortgage calculator determines how much you can borrow total, monthly payments can be set up, unless you prefer a large single payment or a credit line you can borrow against, as needed.
How Getting a Reverse Mortgage is Similar to Getting a Standard Mortgage
Getting a reverse mortgage is similar to getting a standard mortgage in some ways. For example, your reverse mortgage lender may run a credit check to see if you are eligible. Also, reverse-mortgages have associated fees and closing costs, just like traditional home loans. However, if you get a reverse loan those fees are often somewhat hidden or unclear. That is because they are simply deducted from the amount you can borrow, rather than you having to pay them back after the fact.
Reverse mortgages are also similar to traditional loans in the fact that they accumulate interest over time. Therefore, when you get one, the total amount you owe back will be higher than what you borrow. The difference is a reverse loan is a long-term agreement you may not have to pay back for many years. Therefore, interest has more time to accumulate. The total balance will not be due until you stop living in the home, so you will somewhat be in control of the length of the loan.
Reverse Mortgage Obligations Are Easier to Fulfill
One of the major advantages of a reverse mortgage is you will likely find your obligations easier to fulfill. When you get a traditional mortgage, missing payments results in default, meaning the lender can evict you from your home. A reverse loan does not require scheduled payments in the same way. Since there is no schedule, you cannot default. The only primary obligations you have are that you must live in the home on a full-time basis and you stay the homeowner. Therefore, you are responsible for paying taxes and other fees associated with home ownership.