Using a reverse mortgage to address financial problems

Life after retirement is an idealized pipe dream for many, but when it comes to the crunch and financial distress is an active factor in every decision you have to make, you need to find out what your alternative options are. Why not consider a reverse home loan, if you are over the age of 62 and looking for financial solutions? Here are some pointers to put you on the right road. Please first note that reverse home loans are not the same as personal loans as they’re secured on your home. Here are some pointers to put you on the right road.

Flying solo or with the state

There are two ways that you can take out a reverse mortgage: via a government agency, or through a private lender, like a bank. If you take the government option, it is known as a home equity conversion mortgage and it is insured by the state. If you take out the loan through a private lender, it is known as a reverse mortgage. Both options are subject to the applicable federal laws, so ask your lender to help you if you are uncertain about the terms and conditions.

Payback time

The repayments on any loan is a massive headache for most people. You take out a conventional home loan, you would have needed you to pay back the loan monthly for as long as the loan is in action. However, with a reverse home loan you have far more room to move, and there is no actual need to make a repayment until the very end of the loan period. The loan will automatically come to an end as soon as you choose to move out of the home to which the loan is bonded. 

How do I qualify?

To qualify for a reverse mortgage, you have to be 62 years of age or over, and you need to be the permanent resident and owner of the house you live in, which will also be the house that is linked to the loan. The value of your loan will be determined by the company where you apply. Although federal law prohibits you from borrowing the full equity value of your house, a detailed background and credit check will reveal what percentage of your home’s value you will be able to borrow in the form of a reverse mortgage. 

This background check will cover all aspects that might affect your borrowing capacity, such as whether or not you pay your property taxes, whether you are compliant with insurance coverage, and whether you have enough money to continuously maintain and uphold the running costs of your home.

But I live here!

Good – because living in the home permanently, as well as being its primary owner, is one of the main conditions of being granted a reverse mortgage. If you happen to own a property which has multiple residences on it, you will still be required to live in one of them as your main residence, and the value of the property should be high enough to cover the outstanding balance at the end of the loan if the home had to be sold to cover costs.


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