The A – Z of Applying for Reverse Mortgages

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Retirement is a time when retirees relax and unwind from their long-years of labor in the workforce. This period is when they get the chance to pursue notable causes that were not available during their work years. However, it also marks a phase of low income, which can be troubling to any person.

It is worth noting that retirement is not the end of the line for you, as there are several financial options out there that can help you live your dreams. One of these alternatives is a reverse mortgage. There are a lot of misconceptions surrounding this term. It is time to unveil them and discuss what this unique mortgage means.

Are Reverse Mortgages Normal Loans?
You may be tempted to assume that a reverse mortgage is the same as a regular mortgage. However, that is not the case, as reverse loans come with more payment flexibilities. To begin with, you do not have to repay your loan immediately and can defer it for as long as you want. As such, you have more financial freedom to embark on any goal and generate more money.

Is It Ideal?
Of course, obtaining a reverse mortgage comes with its pros and cons. One of the requirements for procuring this loan is that you need to have a permanent home that serves as your primary place of residence. This property doubles as your collateral for the reverse home loan. Hence, your lender can not evict you unless you disregard other aspects of the loan agreement.

Another upside is that there is no specific deadline to repay the loan, unlike the standard mortgage. For this reason, you cannot default on your payment. And even when you do not have to money to repay the loan, you can sell your home at your convenience. It is an ideal choice for people who are downsizing on their property. However, you should know that such loans come with interest that accrues with time. As a result, you may end up paying more than you initially borrowed.

How to Apply for a Reverse Mortgage
The first step to taking a reverse home loan is to find out the amount you qualify for. Your lender will have to evaluate your home in terms of the following: Age, condition, and location. If your home has a high value, you will get a substantial loan, and vice-versa. Bear in mind that you have to be 62 years old and above. The lender will run a background check to evaluate your creditworthiness, the value of your home, and your ability to pay back the loan. Individuals with multiples homes on a property have to select a home that serves as the primary place of residence.

If there is an existing loan on your home, you have to pay off the mortgage from your allotted funds, as the law does not permit a homeowner to have more than one mortgage. With the remaining balance, you can cater to your needs. The lender issues payments in three different options: as a lump sum, as a line of credit, and as a monthly paycheck.

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