When it comes to retirement, several views and plans come into play. Some retirees are scared of leaving their nine to five jobs, as there seems to be no other income source. These individuals fear living from hand to mouth, which is understandable. No one loves to live a miserly post-retirement lifestyle. But what happens when you don’t have the money to meet your needs? Do you survive on family and friends, or think of a suitable alternative? You may have tried other options that have led you to a dead end. But have you thought of using your home equity to finance your needs?
Introducing You to the World of Reverse Mortgages
We all love extra cash in our pockets. However, creating multiple income streams is no walk in the park. For one, you need the money and expertise to invest in assets that will yield returns. But with a reverse mortgage, you don’t just get financial support to cater to your projects, but you also keep the title to your home. “But what about the traditional loans?” you may ask. The standard home loans come with stringent deals.
Additionally, standard home loans are short-term loans. You have to repay your mortgage monthly, which can be demanding on an average retiree. Imagine living with a monthly repayment plan of $2,500 when your earning is barely up to $1,000. With a reverse mortgage, your lender puts money in your pocket without you worrying about repaying it. But is this financial option available to everyone?
It is worth noting that only retirees of age 62 years and older can access this loan. Also, these individuals must have primary, permanent residences where they live. If you meet these requirements, then you can apply for a reverse mortgage.
What Else Should I Consider?
When applying for a reverse mortgage, your lender will consider your eligibility using a reverse mortgage calculator. This estimation will take into consideration the following:
- The youngest age of the borrower
- Interest rate
- Home value – age, location, and condition
Even though you don’t have to make any repayments, your home equity decreases as the interest on the mortgage accrues. But here is the thing; you are selling your home to your lender in bits. Hence, if you decide to sell your home and relocate elsewhere, the proceeds go to the reverse mortgage lender, either a private lender or government agency. Whereby the borrower dies, the co-borrower or heir can sell off the property to pay off the mortgage and retain the home.
The Flexibility of a Reverse Mortgage
Reverse mortgages provide you with the flexibility to accomplish short- and long-term goals. You can generate an extra source of income using your home equity. Your lender calculates the available amount you can access using a reverse mortgage calculator. Additionally, you can live in your apartment for as long as you choose – an option not available with the standard home loan.
Some retirees can take advantage of the Home Equity Conversion Mortgage (HECM) for Purchase to acquire new properties from their reverse mortgage proceeds. There is no limit to this financial haven. Discuss with your lender before proceeding with the process.