When you retire, you may need more money to pay your regular bills or cover the costs of hobbies. If you need additional money for any reason and you own a home, you may qualify for a reverse mortgage. It can let you use the value of your home to pay for retirement expenses. There are several differences between a reverse mortgage and a standard home loan, including the fact a reverse mortgage is only available if you are at least 62. Here are some other questions and answers about the reverse mortgage process.
Why is a Reverse Mortgage Best During Retirement?
A reverse mortgage is better than a standard mortgage during retirement because a reverse mortgage does not give you another bill to worry about. Instead, it continuously pays you with a long-term repayment agreement. You get set amounts each month from your reverse mortgage lender until funds available are depleted. Those funds come from a portion of the cash value of your home. If you prefer, you can also opt for a single big payment or a line of credit you can borrow from when you need to.
What Are the Primary Eligibility Requirements for a Reverse Mortgage?
There are several things you must do to qualify for a reverse mortgage. Obviously, you must own your home. You must also live in it permanently. Additionally, a reverse mortgage calculator tool must determine there is enough equity for you to borrow against. Having enough equity to borrow against is more difficult than you may think because you can never borrow the full home value. Government rules regulate the portion of available equity you can turn into cash.
You also have to meet personal reverse mortgage requirements. For example, if a reverse mortgage calculator finds you can borrow from your home equity, you have to live in the home permanently. If you move out, the reverse loan must be paid back almost immediately. You also need to prove to your lender that you have the means to care for your home. Since you will still own it while the reverse loan is active, you will be responsible for home maintenance. That includes paying taxes.
Can You Add Your Spouse to a Reverse Mortgage Agreement?
You can add your spouse to a reverse mortgage agreement. However, he or she must be at least 62 years of age. Also, it is easier to both sign the mortgage agreement initially. It is more difficult to add your spouse to the loan agreement after the fact. If your spouse is not listed on the agreement and you vacate the home for any reason, your spouse can potentially be evicted from the home. However, you or your family members will have the chance to pay the loan balance, first.
Do Reverse Mortgages Have Fees and Interest Charges?
As you may know, a traditional mortgage includes fees like closing costs. It also includes the addition of interest. A reverse mortgage has similar fees. However, there are some differences in how those fees are applied and paid. For example, initial mortgage setup fees are typically deducted when you first sign the reverse mortgage agreement. A standard mortgage typically charges fees after the fact. Also, a reverse mortgage often lasts longer than a standard mortgage. That means more interest is accumulated. That could seem like a downside, but you have many years before you have to worry about paying that interest. There is also the option of allowing your home to be sold instead of paying off the balance with interest, when the loan comes due.