“After climbing the mountain, you can finally enjoy the view.”
Then, finally, there will be a time in your life when you can finally settle down and enjoy the good things that life may offer. Retirement is when you don’t have to work anymore and spend your time with your family or travel the world is called retirement. The majority of people experience this when they reach the age of 65.
But always remember, not all people are fortunate enough to retire with assets, like owning a house, properties, and many more. Therefore, to enjoy your retirement, you will need the money to fund almost everything you want to do. One way to help you get the money and maximize your retirement is getting a reverse mortgage, which is discussed below.
What Is A Reverse Mortgage?
Reverse mortgages, also known as reverse equity loans, give you access to the amount of money that your property is worth. It is termed a reverse mortgage because instead of paying the bank or any lender, they will be the one paying you, the property owner. Of course, you will need to have a property to serve as your collateral.
One benefit of getting this is that you don’t have to move out, which means that the property’s title is still yours. In addition, qualifying for a reverse mortgage is more accessible than a home credit loan. Furthermore, you don’t need to pay any monthly payments to the lender.
Who Can Qualify For This?
A reverse mortgage is a loan given for those who are 62 years old and above, the retirement age for the majority of the working people. Age is important because it is one of the bases of the lender in determining the amount of money and the interest to be given to you. Another requirement is that the house, serving as your collateral, is your primary residence.
Take note that even if you are still paying off the mortgage of your house, you can still be qualified for a reverse mortgage. The only condition is that the amount of money from the reverse mortgage can pay off that debt. Lastly, it is also crucial that the house presented as your collateral is excellent and livable.
How Much Money Do You Really Get from a Reverse Mortgage?
Reverse mortgages and their terms are based on age. If the primary borrower is married, the terms will be calculated based on the youngest spouse's age as long as they are age 62 or older. The age determines the mortgage amount paid out to the borrower. The younger the borrower, the less money the bank will offer.
If the home is paid off, the lender will typically offer an amount that is less than 80% of the home's equity. This reduction accounts for additional fees that the bank will add to the loan. For instance, if the home's value is $300,000, the mortgage offered will not usually be more than $240,000.
Ways To Receive The Money
There are various ways to get the money you loaned from the lender. The first one is to get it all at once, also known as the Lump Sum. This method has the only fixed interest rate among all the options. It also benefits you more for it offers more opportunities for the homeowner.
You can also receive the money by a tenure payment plan, also known as an annuity plan. The homeowner receives equal monthly payments until the owner decides to move out of the house. If you plan to have a retirement income while staying in your own house for the rest of your life, a tenure plan is best.
Another method of receiving your money is through Term Payment. The lender will pay you monthly for a certain period. The advantage is that you can decide how long you want to receive money; the total amount is divided into the agreed time.
Lastly, you can receive your money through a line of credit. The homeowner will be able to borrow the money at any time. The homeowner has to pay the interest only on their borrowed amount.
Benefits Of A Reverse Mortgage
A reverse mortgage will help support your needs and wants in your retirement. In addition, it will let you enjoy things more because of the financial boost it provides. Below are some other benefits of getting a reverse mortgage:
- The house remains yours. The lender does not change the title’s name, so you can still live there even if you already got the money.
- There are no monthly payments.
- The federal government insures it. It means that you are secured even if the housing market declines.
- As stated above, you have different disbursement options to choose from depending on your preference and needs.
What To Watch Out For?
Like almost all financial-related activities, you should always check if those you transact with are legitimate. It would be helpful to watch out for scams when planning to apply for a reverse mortgage. This loan is for retirees, who are more vulnerable and lack knowledge about modern financial instruments. Do your research and know more about this topic before finding a lender.
Reverse mortgages are beneficial for retirees who want to fund themselves. Also, to maximize their enjoyment at the time of their retirement, applying for this is a big help. It is the time in an average person’s life when they can finally have control and have the money to enjoy all they want.
More Articles from the Wealth of Geeks Network
- Frugal Living Tips from the Great Depression
- How to Make 300 Dollars Fast: 13 Ways to Make Quick Money
Featured Image Credit: Unsplash.
Ryan Luke is a father of three, a husband, a finance blogger, and a full-time police officer. Through proper budgeting and money management, they have been able to live off one income and build wealth at the same time. As an active member of the personal finance community, his goal is to educate and help people get out of debt and build wealth! Come join him in an active conversation about all the best personal finance information available at ArrestYourDebt.com!