Financial fears are an unfortunate, but very real part of life after retirement for many. It takes some ingenuity and a bit of legwork to come up with a contingency plan, but thanks to innovations like the reverse mortgage, you are luckily not out of options at retirement. While it is a very solid option, make sure that you have a good grip on the concept and everything it entails. Here are a few pointers to get you started.
How is the amount calculated and allocated?
When you applying for a reverse home loan, your lender will take several factors into account when considering your application. This range of factors will all come into consideration when your lender checks your data with a reverse mortgage calculator. This clever tool allows your lender to consider your house’s overall value, the state of your existing home loan, and your home’s age and location as components of your application. A reverse mortgage calculator is a reliable way of determining your eligibility for a loan.
What makes it different from a regular loan?
When you take out a regular loan, you are expected to pay back the amount within a predetermined period of time, by a certain deadline. These set repayment periods are generally between five and ten years in duration, and the repayment schedule is calculated based on the size of the loan, your income, and the loan period.
What sets a reverse mortgage apart, is that you will not need to repay the loan until the loan period is over. This can be when the loan period runs out, or when you decide to move out of the house against which the loan was taken out. The rate that is determined by the reverse mortgage calculator will also affect what percentage of your home’s value you will be eligible to receive in the form of a loan.
What happens if I don’t pay at the end?
As long as you stay in your home, you are not under any obligation to pay back any part of your loan. This is because one of the main conditions of the reverse home loan is that you should live in your house for the full duration of the loan, or risk forfeiting it. While this is beneficial in preventing eviction, you shouldn’t forget that other components also form part of the terms and conditions. If you are unable to pay back the loan at the end of the period, the house will be sold to recover expenses.
How does the money come to me when I get my loan?
Whether you take delivery of your money in the form of a single payout (which means all the money is paid over to you in one go, with no further claims to money available), a monthly payout (which functions like a salary) or as a line of credit, you have the freedom to choose your mode of delivery based on your individual needs.