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Increasing Your Retirement Income with a Reverse Mortgage

Increasing Your Retirement Income with a Reverse Mortgage

If you have heard about reverse mortgages being beneficial during retirement, you may be wondering exactly how they differ from other home loans. They are special loans that can help you increase your retirement income, rather than weighing you down with the additional financial burdens associated with traditional loans. Here are some facts you should know about how they can help you retire in comfort.

How Reverse Mortgage Spending Flexibility Can Benefit You

It is important to understand that you cannot borrow the full amount of your home’s worth. A formula based on how old your home is and how well-maintained it is can be used to estimate how much you can borrow. A reverse mortgage calculator will process that formula to produce an estimate for you. Once the estimate is made and the actual amount is finalized, the money will be doled out to you in the amounts determined by the lender.

How you spend the money from your reverse mortgage is your decision to make. Although reverse mortgage calculators are useful for deciding how much you can borrow, they do not dictate how the money can be spent. The total flexibility given to you through the reverse loan may allow you to plan vacations during retirement, cover medical bills or pay for other living expenses.

Reverse Mortgage Lengths and Repayment Terms

Reverse mortgages have no set lengths. They are designed to give you money for long periods of time. Traditional loans require small amounts to be paid back each month. No such requirements are attached to reverse mortgages. Instead, you will be able to use the money throughout your retirement without regular repayment requirements. Repayment in full will only be requested when you leave the home permanently. Upon vacating the property the loan balance will be owed. If you do not pay it, the sale of the home will be instigated. Any balance remaining on the loan after the sale will be erased by your lender.

Reverse Mortgage and Home Ownership Responsibilities

Although you cannot default on a reverse mortgage in a traditional sense, you must understand that you will have ongoing financial responsibilities as the owner of the home. For instance, before obtaining a reverse mortgage you should know that home maintenance will still be your responsibility while the loan is active. Ownership will remain with you, not with your lender. Therefore, you should be prepared to continue paying for routine maintenance, taxes and other fees associated with living on the property. You must meet those financial obligations or the loan agreement may be negated and the full balance will be due.

Planning Ahead When Applying for a Reverse Mortgage

Applying for a reverse mortgage requires some planning ahead of time, especially if you want your home to remain in your family. You or your heirs must eventually pay the loan balance to avoid the sale of the home. Hiring a financial planner will allow you to plan for such issues, as well as other aspects of the reverse mortgage application process. By obtaining the advice of a reverse loan expert you will know exactly what to expect during the application process and throughout the loan duration.

 

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