Reverse Mortgages: I Want One – Now What? #cp

Hey, feel free to leave a comment! You may not think that the age of 62 or older is traditionally the time to have extra cash at hand, but with a reverse mortgage, this is possible. It lets you take advantage of your home equity without needing to sell your house to access the money – this is how it works:

Get paid from your reverse mortgage

A massive benefit to a reverse mortgage is that you can set it up so that it pays you. The total value of your loan will be spilt into monthly payments for as long as there is still money available in the loan. While a regular home loan would have required regular payments, the reverse loan not only pays you, but requires you to live in your house as part of the loan agreement, which means that eviction is impossible, as long as your adhere to your loan conditions.

Government-linked, or private?

A home equity conversion mortgage, or HECM, can only be issued by government agencies, such as the Federal Housing Administration or the Department of Housing and Urban Development. The benefit of an HECM is that it is government-insured. If you prefer to work through a private reverse mortgage lender, you can approach institutions such as a bank for a reverse mortgage. Although these loans are still regulated by government, it is your responsibility to ensure that you approach a reputable lender.

Choose your own method of delivery

A tool, known as a reverse mortgage calculator, will help your lender to determine what percentage of your home’s value you can borrow as a reverse mortgage. Once that is in place, you can choose how you would prefer to receive your funds. You can access it as a line of credit, where you can use the amount you need, as and when you need it. The other options are a once-off large payout, where you receive the full value of the loan in one large, bulk payment, or finally, in monthly payments, where your loan amount is paid out to you in monthly portions, to help you with daily household running costs. The last option is particularly popular, as it acts like a monthly salary, which gives people the reassurance of monthly income, as they would have become accustomed to during the active earning phase of their lives.

Make sure your property is eligible

Lenders are often hesitant to issue loans to rental properties with more than four units on it. A property with four or fewer units is more likely to yield a successful application, but only if you live in one of the units as your primary home. Holiday properties and part-time living arrangements cannot be considered in a reverse home loan application. Make sure that you are familiar with the loan conditions, and be sure that you would be able to honor them long-term, should your application be successful, as defaulting on your loan conditions could lead to the loan being revoked or cancelled

Karl Young

Part-time daddy and lifestyle blogger. Father of 2 boys under 2. Golfer, scare-fan, tea-lover, traveller, squash and poker player. I write on the @HuffPostUK

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