After retirement, you need to be smart about how you manage your money. The equation is simple – if that which you are currently doing is not solving your problem, you may need to change your behaviour to get a different result! Although many people turn to remortgaging their homes upon retirement, it can be a tricky choice, as you do not want to put yourself into a debt spiral after retiring!
But have you considered a reverse mortgage as an alternative to a traditional mortgage? Here’s why you probably should consider it.
How can I access the money in my loan?
The overall amount that you can borrow is based on a percentage of the overall value of your home, and this is determined by a reverse mortgage calculator. The reverse mortgage calculator is a cunning invention that takes all the factors relating to your home’s equity into consideration, works federal lending caps and other factors into the calculation, and gives you your loan amount.
Whether you choose to take the money in monthly instalments, as a line of credit, or as a lump sum payment is up to you. You will have to consider your lifestyle requirements, and decide what mode of delivery works best for you.
Where do HECM’s come in?
Home equity conversion mortgages are an offering brought to you by the Department of Housing and Urban Development and certain other federal agencies. It is also a loan, that pretty much follows the same rules as a reverse mortgage, except that it is backed and insured by government, where a reverse mortgage from a private lender is not.
The government has been getting more involved in lending-based activity, to help people stay out of unnecessary debt. Part of this process has been the introduction of caps placed on loan amounts, which means that you will not be able to get the full value of your home in the form of a loan. You can apply for a percentage of that, and this is where the reverse mortgage calculator comes in. Once the exact value of your home has been established, the process of determining the percentage amount that you will be eligible for, becomes a lot easier.
What are the borrowing terms and conditions?
By now, a reverse mortgage probably sounds like an appealing and smart way to solve money worries after retirement, but as with any loan, there will be a few points that you will have to adhere to in the application process.
Your lender of choice will look at your age, as a starting point. Only those aged 62 and over may apply for a reverse home loan, and in the case of a couple, or joint application, the youngest applicant’s age will be taken into consideration. Furthermore, you will need to be a permanent resident in your house, and not be away from it for more than 6 months at a time for non-medical reasons. If you meet the minimum requirements, you will more likely than not be able to strike a good deal with your lender.