Today’s post is a sponsored post from All Reverse helping you Ease Your Financial Fears with a Reverse Mortgage.
When you are entering retirement, you may have some fears about the changes that will take place in your life, including the change in income you are likely to experience. Finding a way to ease your financial fears is essential if you want to enjoy your golden years. One possible way to do that is by taking out a reverse mortgage on your home, but you need to understand what that means before you do so.
Reverse Mortgage Versus Traditional Loan Repayment Periods
The repayment period, or loan duration, is how long you have to pay back a loan. A traditional mortgage has a set repayment period, such as five or 10 years. Typically, the total you owe and the loan duration are used to calculate the size of your ongoing scheduled payments. However, when you get a loan from a reverse mortgage lender, there is no specified loan repayment period. The loan simply requires you to live in the home to which the reverse mortgage applies. For as long as you stay there, the loan remains active. There are no specific scheduled payments, which means there is also no way to accidentally miss payments.
Reverse Mortgage Borrowing Calculations and Regulations
When determining your eligibility for a reverse loan, one issue that is considered is the current market value of your home. That value is determined by multiple factors, such as whether you already have an existing home mortgage and how old your home is. A loan issued by a large bank, such as a Wells Fargo reverse mortgage and a reverse loan issued by a government agency each require a reverse mortgage calculator to determine what you can borrow based on those factors. Government caps on borrowing amounts are also factored in.
Government regulations also play a role in the calculations that determine the amount you can borrow with a reverse mortgage. The government does not allow you to borrow exactly what your home is worth. Caps are in place to prevent bad deals for borrowers and lenders. You must adhere to those regulations, which is another reason a reverse mortgage calculator is necessary.
How You Can Borrow with a Reverse Mortgage
There are many ways you can borrow with a reverse mortgage. You have to choose the complete terms of your loan when talking to your reverse mortgage lender. For example, if you have concerns about paying your monthly bills, you can request monthly installments of set amounts until the home equity you can borrow runs out. Alternatively, you may decide a line of credit better suits your needs. You can also select one large payment if you have an unexpected expense to cover.
What You Need to Do to Qualify for a Reverse Mortgage
To qualify for a reverse mortgage, you must be at least 62 years of age. If your spouse signs the loan agreement, he or she must also meet that requirement. The home itself must also qualify. You cannot take out a reverse mortgage on a vacation home for example. If the home consists of several apartments it may qualify. However, you must reside in one of those apartments permanently. Other requirements to get a reverse mortgage may include undergoing a credit check and using reverse mortgage funds to pay off an existing standard mortgage if you have one.
Reverse Mortgage Repayment or Failure to Repay
You do not have to pay your full reverse mortgage balance back as long as you stay in your home, except under certain extenuating circumstances. For example, the loan can be called in if you fail to pay property taxes. However, when you leave the home you must pay back what you owe quickly. Typically, you have a few months to do so. Failure to pay gives the lender permission to allow the sale of the home. Remaining funds are given to you if there is a positive balance after the loan is paid.