Reverse Mortgages: Important Things To Know

Disclosure: This is not a sponsored post. There are no affiliate links included in this post. All thoughts are my own and no other’s. This post is now in the guidelines of the FTC

Finding a way to maintain a lifestyle you are used to during retirement can be challenging if you no longer make the money that got you there. Many people turn to mortgaging their home, but there is another solution: the reverse mortgage.


What’s the difference?
You can apply for a reverse home loan if you are 62 years of age or older, as it is designed to specifically be used as a home loan for retirement. The main condition is that you have to retain your ownership of the house and use it as your primary base of residence for the duration of your loan, or
risk having it revoked. With a reverse mortgage, you can set it up to receive monthly payments from your lender, and you can choose whether you prefer to receive it as a line of credit, or as a lump sum. Opting for regular monthly payments could be of great assistance for covering monthly commitments, like bills, and is a good way of freeing up spending money, whereas a lump sum is useful as backup in the case of expensive emergencies, like a hospital visit. Speak to your lending institution for a more specific explanation.


How to calculate the amount you can borrow
A reverse mortgage calculator is the most used tool to help people assess their situation. It will assist your reverse-loan lender in evaluating your home’s value and condition, amongst other factors that contribute to the final amount you would be liable for at the end of your loan. Finally, it will work out what percentage of the total value of your home can safely be lent to you, in the form of reverse home loan. Remember that the final amount is regulated by applicable legislation.


And if I have an existing mortgage?
You can still apply for a reverse mortgage, but bear in mind that you would have to use some of that amount to settle the outstanding balance on the initial loan. The remainder is yours, and you are then free to spend it on your retirement as you wish, without the added pressure of monthly repayments. In fact, you don’t need to pay back your reverse mortgage until you move out of your home. The longer you stay in it, the longer you can enjoy a retirement free of monthly repayment bills. Reverse loans are
great for financial backup in retirement, as you are free to spend your money as you wish.


To pay back, or not to pay back?
As soon as you decide to move out of the house, you will be liable to settle your mortgage. You will have a grace period in which to do so, although not a long one. If you are not able to pay, or simply refuse to pay the balance, the house will be sold by the lending facility. Your other assets will not be
endangered, even if you still fall short on the balance after the sale of the house.

Disclosure: This is not a sponsored post. There are no affiliate links included in this post. All thoughts are my own and no other’s. This post is now in the guidelines of the FTC

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