The Truth About the Reverse Mortgage Hype
The Reverse Mortgage Business is a big confusing industry with more than its own share of pros and cons. Before making any financial decisions, especially one that involves your home please do diligent research and have an attorney review any contract before you sign.
If you are at least 62 years of age, you may be worried about the reduced income that usually comes with retirement. You may have heard that a reverse mortgage can help you but cutting through the reverse mortgage hype can be difficult. How do you really know what they are and what they can do? Here are the true answers to some top reverse mortgage questions to help you cut through the hype.
What Does the “Reverse” in “Reverse Mortgage” Stand For?
The term “reverse mortgage” itself is confusing. You are probably wondering what makes it reverse. The basic answer is traditional home mortgages you can get from banks such as Bank of America require quick and gradual repayment to the lenders. However, a reverse mortgage lender can continuously pay you for a set period. By setting up your loan terms so you receive recurring monthly payments, you can reduce the financial stress of trying to pay your monthly bills on a tight budget. The reverse loan allows you to borrow money on a long-term basis and use it to enjoy your retirement years without the stress of having to repay what you borrowed looming over you.
Can You Borrow All of Your Home Equity with a Reverse Mortgage?
When figuring out how much you can borrow with a reverse mortgage, you must know the total value of your home. A reverse mortgage calculator can help you establish that value. It is a tool designed to factor in multiple variables affecting the equity of your home. Use a reverse mortgage calculation tool because government caps prevent you from converting all your home equity to cash. You must know the total value to then determine the amount available to borrow.
Are There Alternative Ways to Receive Reverse Mortgage Funds?
You can receive reverse mortgage funds in multiple ways. The reverse mortgage calculator is only a tool to help you determine the total amount available. You choose how that amount is doled out to you. If you do not want ongoing monthly payments from your reverse mortgage lender, you can establish other payment arrangements. For example, a large payment may be preferred, if you have a major expense to cover. On the other hand, you might just want the added security of knowing funds are available when you need them. If so, setting up a home equity line of credit you can borrow from only when you want or need to could be a better option.
Are There Strict Qualifications You Must Meet to Get a Reverse Mortgage?
You might have concerns about qualifying for a reverse mortgage, but the basic qualifications are simple to meet. A home with enough equity to borrow against and live in that home on a full-time basis. You must also pass a credit check and prove you can pay taxes and meeting other financial obligations associated with owning the home. If you want your spouse to sign the loan agreement with you, he or she needs to be 62 or older as well.
How Can You Use Your Reverse Mortgage Money?
If you are wondering if there are restrictions on uses for money you borrow with a reverse loan, the answer is not usually. You can use the money to pay bills, fund a vacation or help a family member, among many other things. The loan agreement offers almost total spending flexibility. The only major exceptions are typically funds taken off the top before your initial payment is issued. For example, some funds are taken out of the total you can borrow to cover loan fees. Others may be used to pay off an existing standard mortgage, if you have one.
