Retirement is often regarded as the destination of choice after a long career. But if you didn’t prepare sufficiently, you might find yourself in a position where you need a little bit of extra money to make your retirement more comfortable. Rather than committing to long-term debt that you don’t really need, why not consider looking at a reverse home loan? I’ll break it down for you, to make things easier to understand.
What is a reverse home loan actually?
It is a long-term loan, but unlike conventional loans, you will not be bound to regular, equal, monthly payments until the loan term is over. A reverse home loan will allow you to draw benefit from the money that you have borrowed for the duration of the time that you live in the house against which the money is borrowed, and you will only need to repay the loan at the end of the period.
What is HECM?
This stands for home equity conversion mortgage. Honestly, there is not much of a difference between this and a regular reverse mortgage, except that a home equity conversion mortgage is issued by a state authorised lender, and backed and insured by the state, whereas a conventional reverse mortgage can only be accessed through a private lender, like a bank.
What is a reverse mortgage calculator?
This is a handy tool that lenders make use of to calculate their clients’ financial standing, before granting them a reverse home loan. This tool takes factors such as your house’s age, overall condition and physical location into account. It helps a reverse mortgage lender to calculate the percentage of the home’s total value that you would be eligible for, as federal laws prevent you from borrowing the full equity value of your house in the form of a loan. Remember that, if you have an existing home loan in place, you will have to use funds made available to you in the reverse home loan to pay off the existing home loan first, before your lender will grant you access to the remainder of the funds in your reverse home loan.
In what ways can I access my money?
A reverse mortgage is exceptionally flexible, and you can access the money in the way that best suits your needs. Whether you choose a single bulk payment upfront, where the entire amount is paid over to you in one go, or a line of credit which lets you access the amount you need when you need it (similarly to the way a credit card would have worked), the choice is yours, based on what you need. You can even set it up so that you take receipt of your money in stipulated monthly amounts, mimicking what a monthly salary would have been for you during your earning years. This last option is often very popular, as it gives people some form of predictability and control over their monthly income, and is very useful for those who prefer to set a budget.