A reverse mortgage might sound scary, especially in these times, but it doesn't have to be that way. Many people spend their working lives dreaming about all the things they will do one day when they retire. But what do you do when the time and comes and there's not enough money to do those things with? A money shortage is a real concern when discussing the topic of retirement. Luckily there is a way to get some financial strength back, even if you thought you didn't have it, thanks to the reverse home loan. What's a reverse home loan, you ask? Let me explain.
It is not a regular loan
The main reason why is that you will not be bound to monthly payments as soon as you take out a reverse mortgage. With a regular loan, you would have been bound to years of regular, precalculated monthly payments, with severe consequences if you missed any of them. On the other hand, a reverse mortgage doesn't require you to pay anything back until the loan is concluded.
What makes it a good decision?
One of the biggest fears associated with taking out a loan is the threat of foreclosure and eviction if you are unable to pay. The main terms and conditions of a reverse mortgage is that you have to stay in your house and be the legal owner, in order for the loan to be valid. This makes eviction virtually impossible as the lender would be in contravention of the loan terms if they were to evict you. The next benefit is that there are no regular scheduled repayments, so it is very difficult to default on them - because there aren't any! Yet…
Although there is no such thing as a free loan, you will not be held responsible for any repayments until you decide to move out of the house to which the loan is bonded. Also, remember that other considerations and factors come into play when your lender considers your loan application: you will need to be able to prove that you are able to pay property taxes, maintenance and any other regular costs that are involved with running a household, and you have to remain solvent for the duration of the loan.
How do I apply?
When you go to your lender, the first step is to find out what amount you will be eligible for in the form of a loan. This will never be the full equity value of your house, as this is prohibited by federal laws. However, you will be going to the able to be granted a percentage of this amount, based on the outcome of your assessment.
You need to be at least 62 years old or older in order to apply for a reverse home loan. This is why a reverse home loan is often referred to as a retirement loan. Before the loan is granted, a comprehensive credit check, as well as a check of your background will be performed on you to determine your creditworthiness before your loan is granted.
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