Retirement income is generally a lot less than what you might have grown used to during your career. Instead of remortgaging your home, which could put you into massive debt, why not consider a reverse mortgage? If you are 62 years old or older, you can apply for one of these, which can be a far better solution to creating retirement income. Read on for all the basic guidance you need to help you make a decision and make extra money in retirement.
Extra Money in Retirement
Although a regular loan is a tried and tested way of getting immediate access to sizeable amounts of money when you need it, it also instantly binds you to a long-term payment process, which could put you at risk of foreclosure if you miss any payments. A reverse mortgage can bring you similar benefits, but without putting yourself in the jaws of continuing debt.
Long-term Financial Relief at Your Fingertips
When you are granted a reverse mortgage, you are not under any pressure to start with immediate repayments. The long-term nature of the loan does mean that you accrue a fair amount of interest over time. But you will only be liable for the full amount when you no longer live in your home. The main difference between a regular and a reverse home loan is the flexibility of the loan; and the fact that there is no repayment deadline with a reverse mortgage, meaning that its duration can be extended over several years. You will only have to settle the loan when you move out, generally through sale of the property.
As long as you are 62 or older, it is fairly easy to get a reverse mortgage. As long as you own and permanently live in the house to which the loan is bonded. However, bear in mind that you will be subject to a basic credit check, and your financial stability will be assessed using a reverse mortgage calculator. The calculator ensures that the overall value of your home is high enough to warrant the issuance of a loan. As you can legally only borrow a percentage of the full amount of the house’s value. After all, calculations are complete, your lender will get back to you about the amount that you are eligible for.
They also check whether you can stay up to date with all maintenance, insurance and tax payments. If you miss a payment on any of these during the duration of your loan, your score will be affected. Make sure you understand the difference: you cannot be evicted for non-payment of your reverse loan, but if you are guilty of non-payment of any other commitments that affect your loan terms, your loan could be cancelled.
Paying Off One With The Other
As you cannot have a regular home loan and a reverse home loan at the same time. You will have to use a portion of your reverse loan to pay off the regular loan. Before you will have access to the balance of the funds.