Although retirement is a time that people greatly look forward to, for many, it also comes with a fear of financial instability. Luckily, with a bit of ingenuity and the right resources, it is a solvable problem. Enter the reverse mortgage. This cleverly designed system has proven over and over again that it is a solid, reliable solution to retirement funding woes. To help you get a clear understanding of what it’s about, here are a few guidelines.
How do I know what amount I can borrow?
Several factors come into the equation when you apply for a reverse mortgage. Your lender will take several aspects of your home into consideration, like its age, location, condition, and general level of maintenance. All this data is fed into a reverse mortgage calculator, which will help the lender to ascertain the overall value of your home. The reverse loan calculator is instrumental in calculating the percentage of your house’s value that can be allocated to you in the form of a loan.
Isn’t it just another loan?
The short answer is no. As soon as you take out a regular loan, the expectation is that you will pay back the amount within the time period agreed upon by you and your lender. The payback period is normally based on the value of the loan, your estimated income for the period, and the loan terms themselves.
A reverse mortgage, on the other hand, will not have you under pressure to repay the money right until the end of the loan period, whether that occurs by your choice, or it you default on the loan conditions, in which case it will no longer be considered valid. Because you are legally prohibited from borrowing the full value of your home’s value, the reverse mortgage calculator will help to determine the applicable percentage.
I’ve reached the end, but I can’t pay back – what now?
The main condition of the loan is that you must live in your house for as long as you want the loan to be valid. This arrangement makes eviction close to impossible, which is considered a major plus point of this reverse mortgage. However, it is not the only condition that applies, and if you reach the end of the loan period when you are expected to pay back the loan, and find yourself unable to, the house will be sold to recoup the costs to the lender. This is a standard arrangement on this kind of loan and shouldn’t take you by surprise.
How do I take receipt of my money?
Here you have several options, from a single payment in the form of lump sum encompassing the full value of the loan amount, to a line of credit that allows you to access portions of the funds as and when the need comes up, or as regulated monthly installments, which would allow greater room for monthly budgeting, similar to what a salary would have offered.