Everything You Need to Know About A Reverse Mortgage

This is a collaborative post 

Raise your hand if you can say you’ve got plenty of money to cover everything during retirement! Spending money? Money to cover medical expenses? Money to help the kids? I don’t see a lot of hands up in the air. That is because it’s hard to determine exactly how much you’re going to need to retire comfortably, especially in this crazy world. Instead of worrying about it, why not consider a reverse mortgage loan? It’s a unique kind of loan that might be the answer to your financial needs.

Determining if a reverse mortgage is right for you is easy

Using a reverse mortgage calculator (you can find them online), you can determine whether or not this is a good idea for your situation. This tool will help you and your lender determine how much your house is currently worth based on the age of the house, where it is located, and what kind of condition it is in. The reverse mortgage calculator will tell you what percentage of your home’s equity you will, by law, be able to borrow.

That’s just the beginning. Once you are approved for the reverse mortgage loan, and after you pay off your current mortgage because you can only have one home loan at a time, the cash that’s left is yours to spend. I’ll get to that in a minute. Paying back the reverse mortgage starts when you sell your home as long as you pay your homeowner’s insurance and taxes on time and keep up the house. More on that in a bit.

Get your money using the best payment method for your circumstances

So, the money you have left to spend…you can get it delivered to you in a few different ways. You can take it in a lump sum and bank it, invest it…put it under your mattress. You can set up a recurring monthly payment, which helps with budgeting and provides you with a predictable income. Or you set it up as a line of credit that you draw on whenever you need it. When you get approved for your reverse mortgage, you can set up your payment method when you are signing all the papers.

Paying back the loan comes later

As I mentioned before, you don’t start paying back your reverse mortgage until you no longer own the house or live in it as a primary residence. This could be because you need to downsize, have medical conditions making you move into assisted living, or, quite possibly, death. When you start to repay the loan is, for the most part, up to you. Just remember that the amount you will have to pay back includes the interest that has accumulated on the loan from the time you signed the paperwork to the time you start repayment.

For example, say you need to sell the house 20 years after you take out the reverse mortgage. Whatever proceeds you get from the sale of the house will go towards repaying the reverse mortgage. If there is any money left over, that goes in your pocket. If you still owe, the lender typically forgives the rest. A reverse mortgage gives you a good amount of control over your finances, especially during your retirement.

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