When you retire, you might think you have to say goodbye to the financial freedom you enjoyed while working. Retirement requires you to watch every penny you spend, if you no longer have financial stability. However, you can regain financial freedom by finding ways to augment your fixed retirement income. One way to do that is with a reverse mortgage.
Receiving Money from a Reverse Mortgage Lender
The most important reason you might consider a reverse mortgage when you retire is to avoid the additional ongoing bills created when you take out a traditional home loan. A reverse mortgage is a special loan designed specifically to help retirees. It has a different repayment structure that allows you to borrow the money on a more long-term basis. In fact, a reverse mortgage can last for a decade or more in some cases. It also has no monthly installments you have to pay back.
In fact, the only monthly installments involved in a reverse mortgage agreement are the funds you can request from your lender. You can opt to have them delivered to you in ongoing monthly payments. Doing so provides you with income necessary to pay monthly financial obligations. In a sense, that income partially replaces your paychecks from your working days. However, you can only receive them for as long as there are funds available to borrow.
Establishing the Amount to be Borrowed with a Reverse Mortgage
There are some federal laws that govern the formulas used to determine how much a reverse mortgage lender can lend you out of the total equity, or value, of your home. A reverse mortgage calculator is used to come up with that figure. The online reverse-mortgage calculator program is capable of making those calculations quickly when certain data is provided. As long as the reverse mortgage calculator determines there is enough available equity to borrow, a reverse mortgage might be the best choice to help you relieve your financial stress during retirement.
Exploring Your Reverse Mortgage Money Receipt Options
Figuring out how much you can borrow is only one part of the reverse mortgage process. You also need to decide how you want to receive the money the reverse mortgage calculator says you are entitled to receive. Monthly installments are popular. However, a reverse mortgage also offers you the flexibility to select different ways to receive your money, if desired. For example, you can ask to open up a line of credit you can borrow from when you need to. You can also request the full amount you are able to borrow in a single payment. You choice may depend on how and when you intend to spend the money.
Reverse Mortgage Money Spending Restrictions and Considerations
In general, there are no reverse mortgage money spending restrictions. You can use the funds you receive to pay for anything you like. Medical bills, vacations and home repairs are just a few of the things you could pay for with the borrowed money. However, there are fees taken off the top when you receive reverse mortgage funds. Additional fees are also used to pay off your existing traditional home loan immediately, if you have one. You cannot maintain both loans on a single property on an ongoing basis.
Paying Your Reverse Mortgage Off
You choose when to pay your reverse mortgage off, as long as you keep living in your home. However, leaving your home permanently automatically violates your loan agreement. When that happens, you must pay the balance within a short period of time. If you choose not to do so or are unable to do so, your home must be sold. The proceeds from the sale beyond what you owe go to you. If the proceeds do not fully cover the loan balance, any remaining balance is eliminated.