Most people worry about having enough money to support a decent retirement due to the one-two punch of inflation and economic volatility. The reverse mortgage lenders may be able to help you maintain the standard of living you’ve worked so hard to acquire.While some people take out home equity loans, reverse mortgage lenders can assist retirees by turning a portion of their home value into income-tax-free funds, which can be used to supplement retirement income or lower living costs.
Here are 10 things you should know before adopting a reverse mortgage option offered by reverse mortgage lenders:
- In contrast to a standard home equity loan or home equity line of credit, a reverse mortgage includes flexible repayment options. You can choose to defer payments or pay as much as you’d like toward principal and interest each month.
- Although making monthly mortgage payments is not required, like with any mortgage, the borrowers must meet their loan obligations by paying their property taxes, insurance, and maintenance as they become due.
- The loan debt is due in full whether you move, pass away, or sell your house. There are no penalties for making early payments; you can choose to pay down your principal and interest anytime you want. The house must meet property type and condition requirements and serve as your primary residence.
- The bank holds a lien on your house when you take out a reverse mortgage, just like a regular mortgage. You will continue to have title to the house in your name as the borrower. As was already mentioned, you still have to pay your loan’s requirements, such as taxes, insurance, and maintenance.
- You can select how your funds will be delivered based on your requirements: A line of credit has several advantages over a standard home equity line of credit, such as increased flexibility.
- Monthly advances, either for a predetermined time or as long as you remain a homeowner. If your circumstances change, you can even alter how you get your available funds in the future.
- Those borrowers who choose a fixed-rate loan will get one lump-sum payment at the time of disbursement. Only adjustable rate mortgages are eligible for other payment alternatives.
- In today’s unstable market, a reverse mortgage might increase your monthly income flow and assist you in covering significant bills. For instance, you could refinance your current mortgage and consolidate high-interest credit card debt, vehicle loans, and other loans to lower your debt.
- A new car or a significant house makeover is a possible use for the money. With a reverse mortgage, you may even utilize the money to finance the purchase of a house that better fits your requirements. To relieve financial stress and provide peace of mind, reverse mortgage lenders can assist you in setting up a “standby” line of credit that you can draw upon as required.
- Consider it an emergency fund available for you when you most need it. You might be able to avoid having to sell stocks or other assets by having the money from a reverse mortgage line of credit available, allowing you to hold onto investments and continue to earn interest or dividends.
There are consumer protections in place with a reverse mortgage loan to help make sure you’re choosing wisely.
- Each prospective borrower will meet with an impartial, FHA-approved counselor to ensure they are aware of the reverse mortgage procedure, what it entails, and the specific terms of their loan.
- You won’t owe more money after the reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is repaid than the house is worth. This trait is referred to as “non-recourse.”
- There are also restrictions on the amount of accessible money a borrower may use at closing and during the first 12 months of the loan with a HECM.
- This will extend the useful life of your home equity.
Find out more about the advantages of a reverse mortgage and how to use this useful financial tool to retire more comfortably.
One of the top reverse mortgage lenders in the country, Standard Lenders, is the content sponsor. We are committed to assisting seniors in retiring more freely and comfortably in their homes. Call us to discuss our retirement finance options with one of our authorized reverse mortgage lenders.