Reverse mortgages are available to you only after you have reached the age of retirement (62 years old). But even then does it make sense for you to apply for one? To answer that question you must understand the intricacies of such home loans and what separates them from classic home mortgages that are available to homeowners of any age. To that end, it is time to take a close look at the reverse mortgage process.
Why and How a Reverse Mortgage May Give You Financial Relief
A reverse mortgages may be able to relieve you of some financial stress after you retire because it can give you more money to spend. That money will be taken out of the worth of your home. As the money is spent the equity will diminish, but since you will still own the home the diminished value will not matter. It will only come into play when the home is no longer yours through death or voluntary vacancy. In the intervening years you can use the additional income in any number of ways. For example, it can help you contribute to utility payments, save for a vacation, or assist family members in financial need.
The Application Process for Obtaining a Reverse Mortgage
The application process for obtaining a reverse mortgage is fairly simple. First you must locate a trusted reverse mortgage lender. Then you must decide if you also want your spouse listed on the mortgage contract, since such details can be difficult or impossible to change after the fact. Next, you must undergo a basic evaluation of yourself and your home. That process will include a credit check and a financial evaluation of the home itself. If you and your home are found to meet the requirements you will be given the reverse mortgage.
The Kinds of Homes You Can Attach a Reverse Mortgage To
You may be wondering if you can take out a reverse mortgage on a rental home or apartment. The answer may be yes. However, the home must meet certain federal standards. It also must be your main residence. For example, if you own an apartment building with six apartments you must live in one of them in order to apply for a reverse mortgage, but you can have related or unrelated tenants residing in the other units or in your unit with you.
Long-Term Planning and Reverse Mortgage Contracts
Before you sign a reverse mortgage contract you must think about your long-term goals for your home. If it has been in your family for generations and you want to keep it that way, make sure your heirs are prepared to pay the debt if you pass away before it is resolved. Otherwise, you will not be able to bequeath it to them. Instead the reverse mortgage lender will insist on the sale of the home and use some of the profits to recover the losses from the loan.
If you have any concerns about the long-term financial impact of your reverse loan the best way to alleviate them is to sit down with a qualified counselor and with the help of an online mortgage calculator app get the exact monthly payment amounts you can expect to receive based on your property value. He or she should be a trained third party individual with no affiliation to the lender with which you intend to do business. As an unrelated party he or she can give you an objective and thorough explanation of the loan process and outline your long-term options for issues such as keeping your home in your family.
How to Choose a Reverse Mortgage Lender
Many banks offer reverse mortgages these days. Therefore, you should begin by checking banking institutions with good reputations in your local area. For added security you can also choose from reverse mortgages offered through federal organizations. For example a reverse mortgage applied for through the FHA must be federally regulated. Applying for such mortgages can help you avoid scams, which are prevalent online and in some physical locations.