How many of us can boast of a fantastic retirement, in which we get to spend time doing the things that we love? Or we worry about not being able to achieve specific life goals due to limited finances? In truth, money is great. It is a tool that helps us to realise our dreams. During our years of hard work, most of us have access to a stable source of income. But what happens when we retire? How much money is enough for retirement? As the world plunges into an economic meltdown, many retirees-to-be are worried about not having the capacity to cater to their ever-growing needs and expenses. However, among several financial alternatives, one stands out – reverse mortgages.
Do Reverse Mortgages provide ideal financial safety?
Your financial situation can determine your eligibility for a reverse mortgage. But how can you know if this type of loan is ideal for your situation? It is simple; you can use a reverse mortgage calculator – there are many of them online. With this calculator and the expertise of a local lender or federal agency, you can find out the value of your home and your capacity to repay the mortgage.
What to do when receiving a Reverse Mortgage
Once you fit as an eligible candidate, you have to pay off your existing home loan first before spending what is left of the money. The reason for this rule is that a homeowner can not have two or more mortgages at a time. You can decide to repay the reverse mortgage at any time, provided that the home against which the loan is taken is your primary place of residence. The loan term comes to an end whenever you decide to sell the home and relocate. However, this freedom comes with the condition that you keep up with the payment of your taxes, insurance, and home maintenance.
You can decide a suitable payment method to receive your money; including collecting it as a lump sum, as a line of credit, or monthly paychecks.
What you should know about Reverse Mortgage Repayment
As I have discussed before, a reverse mortgage gives you the flexibility to pay a loan whenever you want, as long as the requirements are in place. However, if you decide to sell the house, then the loan term comes to an end. At this point, you have to pay the initial loan, plus the accrued interest over time. Interestingly, you can sell your home and pay off your loan, which starts from the time you completed the paperwork to the time you commenced repayment.
So, if you decide to enlist your home for sale 30 years after taking the reverse mortgage, you need to pay back the loan you took from the money on your home sale before keeping the rest for personal use. However, if the funds from this sale is not enough to meet up with the repayment, the lender will forgive the remaining balance. For this reason, many retirees favour this type of mortgage to meet their financial needs, without having to lose their homes.