There are a lot of great things about retirement, but a lower income is not one of them. Having less money can cause you to struggle to afford all the things you want to do when you retire, or even have difficulty paying your utility bills. Getting a home mortgage to help may be tempting, but that will give you another ongoing bill to pay, even though it will provide some immediate relief. A reverse mortgage is a special retirement loan only available if you are at least 62 that can be more beneficial. Here’s why getting a reverse mortgage when you retire may be a better idea.
You Cannot be Evicted When You Have a Reverse Mortgage
If you get a standard home mortgage and miss a payment or two, eviction is a real risk.
One of the terms that you must agree to to get a reverse mortgage is that you will live in the home. You will also retain all responsibilities for its maintenance, including having to pay the annual taxes. Therefore, your reverse mortgage lender will never evict you because of that requirement. Also, reverse mortgages have no set repayment schedules, so there will be no regular payments to accidentally miss.
You Can Somewhat Define the Length of a Reverse Mortgage Agreement
A reverse mortgage is never due to be paid back fully until you leave the home. There are some circumstance that may necessitate leaving your home involuntarily, such as long-term hospitalization. However, for the most part, you can dictate the length of the loan by choosing to live on the property for as long as you want the loan to last. Therefore, your loan from a reverse mortgage lender may stay active for many years, whereas a standard home loan requires repayment fairly quickly in a set number of years.
A Reverse Mortgage Lets You Use Your Home Equity While Still Owning Your Home
Selling your home can give you money when you retire but leave you with no place to live. A reverse mortgage offers the best of both worlds because you can keep your home and still use part of its value as spendable cash. When you apply for one, a reverse mortgage calculator can calculate the value of the home and how much you are entitled to borrow. Due to government regulations placing caps on equity percentages that can be borrowed, reverse mortgage calculators are essential to make sure you and your lender are following federal laws.
Reverse Mortgages and Home Equity Conversion Mortgages (HECMs) Are Similar
If you are attempting to get a reverse mortgage and hear the term “home equity conversion mortgage” mentioned, know the two are somewhat the same. The difference is an HECM is offered by a government organization, such as the Department of Housing and Urban Development. Such loans are government-insured. Regular reverse mortgages offered by private lenders are not government insured, but they are still subject to certain federal laws, such as caps on the equity that can be borrowed.
You Can Choose How to Receive Reverse Mortgage Funds
Another benefit of reverse mortgages is you do not have to be paid in a single lump sum like you may get from most standard home loans. However, it is an option. Another option is setting up a line of credit so you can draw against your home equity whenever a financial need comes up. However, requesting your reverse mortgage payments in regular set amounts may make the most sense when you require. Doing so will give you predictable payments for a certain length of time, similar to the paychecks you received when working.