Financial Health: Reverse Mortgages - What Are They And How Can They Help You Retire Comfortably

Here on the blog, I like to discuss topics around financial health. I believe it’s just as important as any other wellness topic because it does have a huge impact on every area of our lives.

Today, we will be specifically talking about reverse mortgages. It’s a mortgage option that I am just now learning about, and I can assume it is something that many of us aren’t aware of.

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This is something great to be aware of if you are currently a homeowner or have plans to become one in the future. It’s so important to be prepared for anything that may arise over the course of your home ownership. It’s a huge purchase and commitment that spans a great part of your lifetime, so the ins and outs are very important to understand. 

I hope that this article is informative and offers some insight into a possible safeguard down the line. We can’t always expect to know what the future will hold, but being informed and prepared for anything that comes our way will ease the stress that is sure to come with any huge life event.

Retirement age may seem like a lifetime away for many of us, but thinking about it when you are young is very important. It’s a day that will come, and if we aren’t prepared, it can be a time of discontentment and fear. It’s much better to anticipate the challenges that will occur during that transition beforehand and to make sure that you have a back up plan if anything comes up.

Losing the income provided by full-time employment can be difficult, no matter how prepared you think you are. Anything can happen, including medical or family emergencies requiring financial resources you may not have. A reverse mortgage is an option that can potentially help you deal with such issues and maintain your financial independence while getting the most out of your retirement when that time comes.

 

Whether You Need to be Retired to Get a Reverse Mortgage

Technically, you do not have to be retired to get a reverse mortgage, but you do have to be of retirement age. The age minimum is typically 62 for reverse mortgage qualification. The reverse mortgage loan model was specifically developed to help retirees live comfortably and avoid losing their homes. It began in New England in the state of Maine in the 1960s.

 

How a Reverse Mortgage is Actually Reversed

When you think of a home loan, you probably envision making monthly payments on that loan for several years. If you chose a traditional mortgage, that is exactly what would happen. If you are already feeling financial pressure, that added bill might be more than you can manage. A reverse mortgage allows you to avoid that issue because you do not have to pay any of what you borrow back for a long time. Additionally, you can set up monthly payments from your lender to you. Therefore, it is somewhat like replacing part of your lost monthly income for a period of time.

 

Qualifications for a Reverse Mortgage the Home Must Meet

To qualify for a reverse mortgage, the home must meet certain requirements. One is it must be valuable enough for the calculated equity available to borrow to be worth actually borrowing. A small home, one in a state of disrepair or one that is otherwise low in equity may not qualify. That is because a proprietary reverse loan calculator must determine enough equity is available. The calculator is an online tool for reverse mortgage calculationthat uses pre-programmed algorithms to calculate the amount available for a lender to loan to you. The formulas are necessary partially due to government restrictions regarding the percentages available to borrow.

Not every home qualifies for a reverse mortgage. That is even true if a reverse mortgage calculator tool would determine the equity is high enough. For example, a home can only qualify if you, as the loan agreement signer, are living there on a regular basis. It cannot be a home you only use as a vacation getaway. You also cannot get a reverse mortgage on most larger apartment buildings. However, an apartment building with four or fewer units may qualify, as long as you live in one and own the property.

 

The Flexibility of Borrowing with a Reverse Mortgage

As mentioned earlier, you can set up a reverse mortgage so you receive equal amounts monthly while funds are available. However, one major benefit of a reverse mortgage is flexibility. That flexibility extends to how you receive your money. If for some reason you do not want monthly payments from the lender, you can ask for other loan terms. For example, you might want to borrow only what you need when you need it. If so, a home equity line of credit is the solution. Alternatively, you might have one large unexpected expense to deal with. In such a case, you can request one large up-front payment.

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I hope that this article was informative and that it provided some insight into your future financial health. Regardless if you choose to explore this route when retirement age rolls around, it is always good to know your options and have security in knowing that there are many available. We can’t predict how the future will be, be we sure can do our best to plan ahead and be prepared even for undesirable circumstances.