If you want to relax when you retire, you need to be comfortable. That includes financial comfort. Your home could be a great source of that financial comfort, when you find yourself lower on cash than you would like. Applying for a reverse mortgage is a way to get that cash out of your home equity so you can spend it.
The reverse mortgage supports you in retirement
You could potentially get a traditional mortgage on your home when you retire. However, doing so creates one major problem. It sets off a chain reaction that causes you to receive mortgage bills all the time. When you are already having trouble meeting financial obligations, adding a bill is not really providing any financial relief.
A reverse mortgage is meant to make retirement easier. It was specifically designed with that purpose. For that reason, it comes with no bills to pay. You receive your money and that is that, at least as long as the agreement is maintained.
Whether it lasts for five, ten, twenty, or some other number of years, you are not obligated to give back any of what you borrowed while a reverse mortgage is active. But you do really need to examine the details of the reverse loan application process before you agree to it. You will owe the money back at some point down the line. That point is usually established based on when you opt to move out. However, there are other situations that could trigger the early end of your reverse loan agreement.
Making sure a reverse mortgage is available
To apply for a reverse mortgage, you must make sure one is available to you. For it to be available, you have to be age 62 or above. The house must also have a certain value, especially since borrowing caps are in place limiting you to only borrowing a portion of its worth. Additionally, you have to be the owner of the house and a primary resident in it. Properties you rent and do not live on are ineligible.
One thing you might think makes a reverse mortgage unavailable to you is already having a traditional home mortgage. However, one of the most useful aspects of a reverse mortgage is its continued availability, even when a standard loan is active. You can use that to your advantage because getting a reverse mortgage obligates you to take a portion of those funds and use them for traditional loan balance elimination. That rids you of the burden of ongoing mortgage bills.
Reverse mortgage fund delivery and usage
You might be wondering how and when you will receive reverse mortgage funds. The answer is exactly how and when you want. You can create a schedule that provides you with monthly money.
However, you can also take funds out exactly when you need them in the exact amounts needed with a line of credit. If neither of those appeal to you, a lump sum similar to what you would get with a traditional mortgage is also available.
Places to apply for reverse mortgage assistance
As you might expect, you can apply for a reverse mortgage with a credit union or banking institution. However, not every bank offers a reverse mortgage option. You have to look for one where it is offered. What you may not realize is that certain government organisations offer reverse mortgages as well. They just often call them home equity conversion mortgages (HECMs).
When it comes down to mortgage decision crunch time, remember details matter. For example, an HECM offers more federal protection. However, a private reverse mortgage might have more flexible rules. Interest rates and fees are also factors. Once you take all things into consideration, you can make sure you are deciding in an informed way.