Helping Parents Figure out Reserve Mortgages
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How To Create a Financial Safety Net In Retirement
The word “retirement” might conjure up one of a multitude of images, from being able to take part in all the things and activities that might have called your name during your working years, to a slightly more grey-toned aura of concern about financial stability in the absence of a regular income. For many whose worries include no longer earning a salary, a loan has for many years been the go-to solution. But take heart – the traditional personal loan is not your only recourse – here’s why a reverse mortgage is the way to go.
What is a reverse mortgage?
If you consider what you know about a traditional mortgage, or even a regular loan, you will no doubt consider the fact that you are liable for repaying the amount in monthly increments, until you have your lender off your back. Now compare this to a traditional mortgage, where you are not liable for any repayments at all until the end of your loan term.
This is, like any loan, subject to a few conditions. Firstly, you will be required to live in your house as your primary, long-term place of residence, and needless to say, you need to be the legal owner. A reverse mortgage actually pays you monthly, by making the money in you loan available to you as long as the loan remains valid (and funded!).
How do I get one?
The minimum age to qualify for a reverse home loan is 62, which is the reason it is also know as a reverse home loan. Any younger than that, and you will not be eligible to apply. Because you are still dealing with a loan, certain limitations and conditions apply, such as your overall creditworthiness, which will be easily determined by a background check. Other factors, like your home’s overall value, its condition and location, will all be considered when your lender uses a reverse mortgage calculator tool to determine your eligibility for this kind of loan.
If the loan is granted, you will be expected to settle any outstanding amount on your current mortgage (if you have one) before you will be able to access the balance of the money in the kitty.
Which way forward?
Even though its terms and conditions seem far more manageable than that of a regular home loan, it is vital that you treat the reverse home loan with the same caution and respect with which you would have approached any other loan. In other words – will you be able to pay when the time comes? Remember that your lender will also consider things like whether you can afford other peripheral costs of owning a home, such as taxes, maintenance costs and insurance. The better your overall credit score, the better your odds of being awarded the loan. If your property consists of multiple dwellings, you will still need to live in one of them permanently in order to qualify for a reverse home loan.
