A Reverse Mortgage May Help You Live Comfortably in Retirement
What do you do when you retire? The answer is anything you want, if you have the financial stability to do it. However, when you are used to receiving regular pay and your income is suddenly decreased, you may worry about living in financial comfort during your retirement years. If you are a homeowner, you may eliminate some of that worry by taking advantage of one of your biggest assets, your home. Some of your home equity can be converted to ready cash when you apply for a mortgage. But, as a retiree, you should not just apply for any mortgage. A reverse mortgage is the most potentially beneficial mortgage type for you.
What is a Retiree Reverse Mortgage?
A reverse mortgage is a mortgage only available if you are at least 62 years of age. Since it is specifically designed for retirees, you may wonder what makes it special. A few things make a reverse mortgage different from a traditional mortgage. One is the payment method. A reverse mortgage can provide you with money each month. A standard mortgage usually gives you a lump sum payment that you have to pay back each month in installments.
A reverse mortgage is also different because it is not paid back on a particular schedule. In fact, you owe nothing back right away. You have to agree to stay in the home and use it as your primary residence, but that is one of few requirements. As long as you do so, the loan can last for many years. It is only called in when you violate the agreement by moving away or violating another term of the loan. For example, the loan can be called in if you file for bankruptcy or otherwise fail to meet your obligations as a homeowner.
What is a Reverse Mortgage Calculator Tool?
When you apply for a reverse mortgage, you may hear the term “reverse mortgage calculator” used a lot. It is an online tool necessary for figuring out the total amount of your reverse mortgage. The purpose of an official reverse-mortgage calculation tool is to take into account government regulations and other necessary factor for figuring out how much of your home equity can be converted to cash. Legally, you cannot borrow the full home value. The tool can make those calculations quickly so you and your lender can enter into an accurate agreement.
Reverse Mortgage Hidden Costs and Fees
When applying for a reverse mortgage, you must be aware of fees and hidden costs. The amount the reverse mortgage calculator stipulates is not necessarily how much you will borrow. It also is not the amount you need to eventually pay back. That is because closing costs and other fees are deducted before money is doled out to you. Additionally, you are required to allow your standard loan to be immediately paid with some of the reverse mortgage funds, assuming you have such a loan. Also, the actual amount you borrow will accumulate interest you must also pay back when the loan comes due. Since that may be many years down the line, expect the interest amount to be quite high compared to interest on a traditional home loan.
Where to Get a Reverse Mortgage
Reverse mortgages originated in the United States in the 1960s. In the early days of reverse mortgages, it was difficult to find lenders offering them. However, many lenders today offer reverse mortgages. That includes local banks and credit unions, as well as national banks with many branch offices. Some government organizations even offer their own versions of reverse mortgages called home equity conversion mortgages (HECMs). The important thing, when applying for a reverse mortgage, is to obtain one from a trusted source. As with anything else in today’s world of technology, there are some reverse mortgage scams in operation. You need to avoid such scams by seeking a reverse mortgage from a source you know is legitimate.