Retirement is a time of spending time and money on things you wouldn’t have had time or money for during your working days, right? But what happens to the dream when the time for retirement arrives, and you don’t have enough fluid cash at your disposal? Enter the reverse home loan as financial solution.
Explain to me exactly what a reverse home loan is
One of the major benefits of taking out a reverse home loan is that you will not be bound by strict repayment terms within a set period of time, as you would have been in the case of a normal loan. In fact, you don’t need to worry about repayment at all until the loan term comes to an end, which is only likely to occur once you move out of the house.
What makes a reverse mortgage useful?
Probably the single biggest benefit is that it is almost impossible to be evicted from your house while you are bound to a reverse mortgage. One of the main criteria of a reverse loan application is that not only do you have to own the house against which you take out the loan, you also have to live in it permanently. Don’t lose sight of the fact that this home loan is still a loan though, and that you will still be subject to various other terms and conditions in order for the loan to remain valid.
Is it difficult to apply for one?
You still have to go through a loan application process, as you would have with any other loan. You will only end up with a percentage of the overall value of your house in the form of a loan, as federal laws prohibit you from taking the full value of your house in cash. In order to establish what exact percentage of your house’s value you are eligible for, your lending company will make use of a handy tool known as a reverse mortgage calculator. This calculator works on a points system, where points are allocated to your application, based on your answers to various questions about your house and its condition, age and location. This, combined with a standard background and credit check, will form the backdrop against which your loan application is assessed.
Are there any specific conditions?
To be able to apply, you need to be aged at least 62, own the house against which you are taking out the loan, and live in this house permanently. If you have an already existing home loan which is still active on your house, the balance of what is still owed to your lender will have to be paid off, using funds that are made available to you in your reverse home loan, before you can access the balance of the money in your loan.
As soon as any existing debts have been paid off, you will be able to access the money in your loan account as either a lump sum or smaller payments, which you can then spend in any way you see fit.