Retirement is supposed to be a time of relaxation and fun, but it can also be a time when your financial obligations increase and your income decreases. Whether you have medical bills to pay or just want to have the funds to do what you want when you retire, that drop in income presents a problem. One possible solution is to take out a mortgage on your home. If you are considering that option, a reverse mortgage may offer you more benefits than a traditional home loan.
Reverse Mortgages Have No Repayment Schedules
The reason a reverse mortgage may benefit you in retirement is it is specifically designed to help you when you retire. In fact, you cannot get one until you are at least 62 years of age. When you see a reverse mortgage lender, the terms of the loan will be very different than when you go to a standard mortgage lender. For example, reverse loans are not paid back on set schedules. Therefore, your ongoing bills will not increase. You can pay the loan back somewhat on your own terms, as long as you keep living in the home.
What Happens to Your Reverse Mortgage When You Leave
When you get a loan from a reverse mortgage lender, the agreement will stay active for as long as the home is the main place where you live. You cannot use it as a vacation home or take out a mortgage on it if you do not live in it. However, there will be a time limit defining long term residency. For example, if you leave your home for a short hospital stay, it will still be considered your primary residence.
If you leave your home for longer than the time limit, which is usually six months or a year, the full loan balance will be due. You or your family members may be given a few months to pay it. If it is not paid in full, the sale of the home will be initiated. Any extra proceeds from the sale will go to you or your family. If a balance still exists after the sale, the remainder of your debt to the lender will be erased. Any other assets you have, such as vehicles, will not be part of the loan agreement.
Determining the Exact Amount of Your Reverse Mortgage
The way the amount you can borrow with a reverse loan will be determined is using a reverse mortgage calculator tool. The tool is essential because the exact current value of your house must be determined. Then the reverse mortgage calculator must be used to determine the percentage of that value you can actually borrow. That step is necessary because government regulations are in place that prevents the full value of your home from being borrowed. The purpose of the regulations is to provide a layer of protection for you and your lender.
Additional Qualifications to Get a Reverse Mortgage
Being at least 62 years old and owning a home are important qualifications for a reverse mortgage, but they are not the only qualifications. You must also prove you are capable of retaining home ownership during the duration of the loan. Therefore, the lender will ask you for information about your income. A credit check will also be done. The purpose is to prove you can meet your home ownership obligations, such as paying for repairs and taxes.