*This is a collaborative post*
Are you reaching the age of retirement and thinking of ways to supplement your income? Or thinking about your retirement during times that can seem a little uncertain? It may be worth having a look at some options that may be suitable for you. One thing that may work in your favor is considering a reverse mortgage loan. This is a loan meant specifically for retirees who are 62 and older and are needing to supplement their existing income. But there are things you need to consider carefully.
You Control the Duration of the Loan
One of the biggest differences between conventional loans and reverse mortgage loans is the length of time they are taken out for. Traditional mortgages are usually 15 to 30-year fixed mortgages with a monthly payment attached. With a reverse mortgage loan, the duration of the loan depends on how long you live in the home. For instance, if you remain in the home for five years, it will come due in five years. If you choose to remain in your home longer, the loan will be for a more extended period. Additionally, there are no monthly payments.
While not having to pay a reverse mortgage back right away, it does accumulate interest throughout the loan. This will cause the balance of the loan to be considerably more when it eventually comes due. If you can no longer reside in your home for any reason, the loan will become due. If you or your family are unable to repay the loan within a short amount of time, the lender can then sell the home at his discretion.
How the Value of your Home is Calculated
When deciding if a reverse mortgage loan will work to your advantage, it is good to know the value of your home and how much you are entitled to borrow against it. To make this determination, lenders use a reverse mortgage calculator. The final calculations will depend on the age, the condition, and the location of your home. This way, all pertinent information is factored into the final calculation as you consider how you want to manage finances during your retirement time.
While the reverse mortgage calculator tells you how much you can borrow, you will still need to decide on what way you will receive your money. This is the easy part! The options available include:
One Lump Sum – Getting your money in one lump sum at the beginning of the loan.
Monthly Payments – Getting your money in installments, which are usually paid monthly. This is especially helpful if you are used to getting a monthly paycheck.
Available Line of Credit – This resembles that of a credit card. You will have an available line of credit that you can get your money from whenever you need it.
Combination – If you cannot settle on just one way to receive your money, you can choose more than one way and combine them to better suit your needs. For instance, if you like the idea of getting a monthly payment and need a lump sum, you can get a specific amount in a lump sum and the rest in monthly payments.
What Type of Properties Qualify for a Reverse Mortgage?
There are specific rules that pertain to what type of properties qualify for a reverse mortgage loan. Most importantly, the home in which you are taking the reverse mortgage out on must be your primary residence. It cannot be a vacation home, a rental home, or any other property of which you do not reside. It is possible to obtain a reverse mortgage on a small apartment building with four or fewer apartments as long as you reside in one of them.
So if you are thinking about your retirement and what options are available then this may be one to consider. Making sure you are secure financially, is after all one of the most important things you need to plan and prepare for.