We all think about retirement and the different things we want to do when we retire. You may have big dreams of taking vacations, having your home remodeled, or even taking up a few hobbies. The last thing you want to do is worry about your finances. Retirees have a valuable tool available to them that can be utilized as a part of their retirement strategy. If you are 62 or older, you may qualify for a reverse mortgage loan. This will help provide you with the cash you need to fulfill your dreams and desires during the years of retirement. There are many advantages of reverse mortgage loans for those who are looking to supplement their retirement income.
Reverse Mortgages and the Categories Available
There are different types of reverse mortgages, falling into two main categories: Private reverse mortgages and Federal Housing Administration-insured reverse mortgages (Home Equity Conversion Mortgages), or “HECMs.”
The most popular reverse mortgage is the standard HECM loan. This loan is insured by the federal government and comes with specific protections and rules.
- You will never owe more than the home is worth.
- You will receive loan proceeds even if the bank or lender goes out of business.
- Your spouse and/or other title holders are entitled to certain protections under this loan.
Another popular reverse mortgage product is the HECM for Purchase reverse mortgage. This loan essentially turns a new home purchase and a reverse mortgage transaction into one. It allows you to use the money from the loan to purchase a new home.
The Differences Between a Reverse Mortgage and Standard Home Mortgage Loans
A traditional home mortgage loan requires monthly installments to be made to the lender to fulfill the loan obligation. A reverse mortgage is just that, reversed. In a Reverse mortgage, instead of making monthly payments, a lender makes payments to you, based on your home’s value. The different payment options with a reverse mortgage are lump sum, line of credit, ongoing payment (term payment), guaranteed payment (tenure payment), or combination payments.
Qualification Factors when Obtaining a Reverse Mortgage
There are basic requirements needed to qualify for a reverse mortgage loan.
You must be at least 62 years old, live in the home as your primary residence, have sufficient home equity, and meet financial eligibility criteria. The amount you can access from your home equity is based on the following:
- Age of the youngest homeowner
- The current value of the home
- The balance on any existing mortgage loans
- Interest rates
There are also guidelines and requirements for the home. It cannot be a vacation home or a rental home. It can be a multi-apartment home if the borrower lives in one of the units permanently. Borrowers must remain current on property taxes, homeowners’ insurance, and any other necessary responsibilities.
Boost Your Cash Flow with a Reverse Mortgage
Many people entering retirement experience a drastic reduction in income. They are often left with little (or no) money to do the things they dreamed of doing. The good news is that those who are 62 and over with sufficient home equity, can get access to cash from their home equity with a reverse mortgage loan. There are many ways to access the money once it is approved. So, if you are a homeowner reaching the age of retirement, a reverse mortgage is one option that may benefit you by helping you manage your financial challenges.