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Friday, April 5, 2019

Why Applying for a Reverse Mortgage May Be a Good Decision

If you are facing a financial crunch during retirement, you may need to access the equity in your home to help cover your living experience. Doing so using a traditional home loan may provide temporary relief, but it only adds to the bills you have to pay. It also leaves your home susceptible to seizure, if you miss a payment. Applying for a reverse mortgage may be a good decision if you want to avoid such problems.

Comparing a Reverse Mortgage to a Traditional Loan

A traditional mortgage has some advantages, but it also has many disadvantages. For example, you are expected to pay parts of it back at regular intervals. Those payments begin shortly after you request the loan. The loan you can get from a reverse mortgage lender is quite different because it is a long-term loan. You are not expected to pay any part of it back right away. In fact, you are discouraged from doing so. For as long as you stay in your home, you can pay back the balance at your leisure.

Accessing Home Equity with Your Reverse Mortgage
Despite the benefits of a reverse mortgage, you cannot use it to convert the entire value of your home to cash. You are only entitled to a calculated percentage. A reverse mortgage calculator is a special calculation method that can tell you that amount. The calculator uses specific information to make that determination, including the current market value of your home. The amount you can borrow is also influenced by federal laws that place caps on reverse loans.

Collecting Your Reverse Mortgage Money
Figuring out how much you can borrow is only part of the process. Once you get a reverse mortgage calculator to figure that out, you can decide how you want to collect your money. You can opt to receive regular payments from the lender for as long as there are funds to borrow. That is a popular option since it can allow you to pay regular bills you receive each month during your retirement, such as utility bills. You can also choose to receive a single payment or request an open credit line. The latter lets you borrow money whenever you need to in an amount you choose. However, there is a maximum limit placed on how much you can borrow.

Paying Fees Associated with Reverse Mortgage Agreements
One thing about a reverse loan that is similar to a standard mortgage is you do still have to pay closing costs and fees. However, the fees you owe are somewhat hidden because they are typically deducted from the total amount available to borrow at the outset, as opposed to charged to you later. You should also be aware that legislation now allows you to pay off a reverse loan early if you choose to do so, but you may be charged processing fees for doing so. Therefore, you should not enter into a reverse loan agreement until you are sure you approve of the terms.

Maintaining Possession of Your Home with a Reverse Mortgage
Taking out a reverse mortgage on your home is one way to guarantee you retain possession of it, provided you can continue paying taxes and other costs associated with ownership. You cannot get evicted for failure to pay on time because your loan payments are not due on a set schedule like those associated with a standard mortgage. However, you must live in your home until the loan is repaid or the balance will be due early.

*Read my Disclosure


  1. Thanks for the info, have been wondering about how that works.