Imagine the fear of having to retire without having enough money, coming true. There are not many things that can compare to finding yourself in a pinch for cash at a time when you are not earning money. Instead of being able to take the time to rest, you will have to apply your time and resources to survival. Many people make the cardinal error of resorting to taking out loans to cover personal costs, but the consequence of that is an unfortunate debt spiral and compromised credit ratings. In addition, defaulting on the set and rigid payment structure of a personal loan puts you at risk of foreclosure and eviction. So how to get around this problem? Have you considered a reverse mortgage as a solution to retirement money woes? Never heard of it? Keep reading!
Retirement mortgages: making your assets go further
Whether it is communicated as a reverse mortgage or a retirement mortgage, the benefits of this type of loan are multiple! It has the capacity to relieve major financial stress, without adding to a compounding problem by adding more debt. Sound too good to be true? Believe it – you will not owe a cent until the loan period comes to an end.
The overall value of your house, as dictated by its age, size, physical condition and location, is a major factor in determining the amount of money you can borrow in the form of a loan. The greater the value of your house, the higher the amount you can borrow, but do bear in mind that there are certain federal laws in place that limited your borrowing amount to a percentage of the amount, and not the full value. This is to prevent overborrowing, and is a highly calculated move by government, so do not try to twist your lender’s arm – it won’t work. The final amount that is granted to you is determined by a reverse mortgage calculator, a tool that all lenders use to calculate the applicant’s individual financial standing.
Is a reverse mortgage all it’s cracked up to be?
Although you will not be bound by monthly repayments, a reverse payment remains a loan, so be sure that you have your facts straight before committing. You will have to remain the legal owner and permanent resident of your house for as long as you need the loan to remain valid. Moving out or renting out your house will be a violation to the loan terms, and your lender will have legal grounds to cancel your loan if you do. You will, for the same reason, also not be able to use a holiday or rental property as collateral for your reverse home loan. On the upside, the requirement that you should live in the house as a loan condition, makes it very difficult for you to be evicted – as long as you remain compliant with all other loan conditions that you will have agreed to.