There is a self-awakening that comes when people are close to the retirement age, especially for those that are 62 years of age and older and do not have enough financial resources to cater to their post-retirement needs. One way to fix this issue conveniently is to apply for a reverse mortgage loan. This type of mortgage helps you cater to several expenses while maintaining ownership of your property. You can go on vacations, purchase new furniture and home appliances, or even buy a new car, without breaking the bank.
What Type of Reverse Mortgage Can I Access?
Before you reach out to a lender, it is vital to know the types of reverse mortgages and how they meet your needs. Reverse home loans are of two types, namely:
· Private single-purpose reverse loans
· Home equity conversion mortgages (HECMs)
Private reverse loans cater to property taxes, home developments, and repairs. Homeowners with small or mid-size incomes can access this type of mortgage. On the other hand, the U.S. Department of Housing and Urban Development (HUD) provides HECMs. This loan comes with insurance and rules.
Receiving Funds from Your Home Equity
According to federal law, there is a limit to what you can borrow. In actuality, you can only borrow up to 60% of your home equity, as some part goes toward paying off your existing mortgage, closing cost, and other related bills. Another factor worth noting is that you can receive specific funds based on your age. Your lender will use a calculator to evaluate the amount.
How You Can Benefit from a Reverse Mortgage
Unlike the regular mortgage where you make monthly payments on your home’s principal, a reverse mortgage puts money in your pocket based on your home’s equity. Interestingly, you do not have to worry about meeting deadlines, provided you can pay property taxes, home insurance, and home maintenance costs. You have to be a permanent resident at your primary home; this gives you the freedom to live in your apartment for as long as you want without being disturbed.
On What Grounds Can I Lose My Home?
Although, with a reverse mortgage, it is hard for you to lose ownership of your home because of the opportunities it provides. However, if you do not meet specific conditions, then there are chances that you will lose your home.
· If you stay outside your primary residence for six months or longer due to non-medical reasons
· If your home is not your primary residence anymore
· If you spend more than 12 consecutive months away from home
· If you do not maintain your home based on FHA requirements
· If you are no more and there is no trustee on the reverse mortgage
· If you cannot keep up with the cost of maintenance, property tax, and home insurance
A reverse mortgage provides you with the opportunity to receive payments in three different ways. For one, you can set it up as a line of credit, where you can borrow money when needed. However, this option comes with limits. You can also receive it as a lump sum – an ideal choice for individuals with multiple emergencies. Finally, you can receive your payments as monthly paychecks; this is necessary to cater to monthly expenses. Having a reverse mortgage gives you the financial freedom you need for a post-retirement lifestyle.