The Comprehensive Guide To Reverse Mortgages
Retirement should be a time of your life where you can look back at everything you’ve done during a busy career, and to reap the fruits of your labours and enjoy your hard-earned money. But if you have not taken any steps to secure your retirement funds, you could find yourself in a very different situation. If you find yourself in the second scenario, you will have to come up with a plan B, and quickly. This is the point where the reverse mortgage comes in for most people. Here’s how it works.
Why a reverse mortgage,and how do they work?
Compared to a regular mortgage, reverse mortgages run over a far longer term, and were created to help homeowners meet financial needs during retirement with a much lower risk factor. If you are granted the loan that you apply for, you should be aware of the fact that you will first need to pay off any outstanding debt on your current home loan, before your lender will grant you access to the fees in your loan account.
Closing costs and handling fees will also have to be factored into any decisions you make about your reverse home loan.
The value of your home in a reverse mortgage application
During your application process, your lender will make use of a reverse mortgage calculator to assess your individual financial position at the time of your application. Your home’s age, location, condition and overall market value will all be factored into your application, and the amount you would be eligible for is calculated by a reverse-mortgage calculator. This is a handy tool that is used by lenders that offer this kind of loan, to keep the application subjective and neutral, and to help prevent fraud.
Government has recently instated certain laws which have led to caps being placed on the amount that can be borrowed. These laws apply to both privatel-owned reverse mortgages and In recent years, the government has enforced this law in which reverse loans come with highlighted borrowing caps. It does not only apply to the government-insured reverse mortgages, but also to the government-backed and -insured version, known as an HECM.
In what form is the money made available?
As soon as your loan is granted, you can decide in what form you would like to take receipt of the funds. You can pick one of three ways in which to do this. The first choice is monthly payments, which is he most popular option, as it often takes the place of a salary paycheck. You will receive evenly-portioned amounts every month until the funds are exhausted. You can also set it up as a line of credit, where you can access the amount you need, as and when you need it. Finally, you can also choose to have the full amount paid out to you in one go as a lump sum, after which you will be responsible for managing the funds yourself.