Find out about reverse mortgages
Chilling out and catching your breath are the hallmarks of a good retirement, but nothing can turn a good deal bad like running out of money! Although history has shown people to turn to remortgaging of their homes, this is a bad idea on many levels, not least of which is the fact that you don’t want to enter a brand new debt spiral upon entering retirement! So, what’s the alternative? Close, but not quite the same, is the reverse mortgage, which is also known as a retirement mortgage. Here’s why there is value in investigating this option.
Why not a traditional loan?
Remortgaging your house according to the limitations that come with a traditional loan, can be crippling. You will be expected to start repaying the instalments immediately, which is tricky if you take out the loan to create some financial fluidity in the first place! A reverse mortgage alleviates a lot of the external pressures associated with loans, as the repayment of the loan is only due when the loan comes to an end and does not apply while the loan is still active.
Ok, a reverse mortgage then – but what is it?
The reverse mortgage application process is almost entirely based on the workings of tool called a reverse mortgage calculator. Data is entered into the calculator that helps the lender to make the best decisions about your loan application. Aspects like the age, location, and overall condition of your house, as well as your current home loan status are all considered.
The reverse mortgage calculator is also designed to factor in things like the federal cap that government has placed on loan amounts, to prevent reckless borrowing. The result of this is that you will only be granted a percentage of the overall value of the house in the form of a loan.
One of the main benefits of a reverse mortgage is that you are highly unlikely to be evicted, as one of the chief conditions of the loan is that you are required to not only be permanently resident in the house, but also be its legal owner. You may not apply for a reverse home loan on a holiday home, and you may not use a house that you are renting, either. As long as you remain the home’s main resident for the full duration of the loan term, and do not violate any of the secondary conditions, you loan will be in place until you move out of the house or use up the funds.
How can I use a reverse mortgage to lighten my financial load?
There are a few options when it comes to your money, how you receive it and how you use it. The most popular one is to have your lender pay the funds to you in monthly instalments over an agreed-upon period. This mimics a salary payment and creates predictability. Further options are a single lump sum payment or a line of credit. The final choice is yours.
Posted by: Sarah Dixon | Posted on: October 28, 2020 | Posted in: MAMA