Collaborative guest post
If you have heard that a reverse mortgage is a great way to pad your income when you retire, you may be right. Reverse mortgages are certainly tailored to retirees. In fact, you cannot obtain one unless you are at least 62 years of age. Nevertheless, you must examine all aspects of reverse mortgages before you sign a contract with a lender.
How to Sign up for a Reverse Mortgage
To sign up for a reverse mortgage you must first make sure doing so is financially worth it to you. To do so you can use a reverse mortgage calculator. Since the federal government regulates the percentage that can be borrowed and the market value of your home must also be considered, a reverse-loan calculator uses a formula to accurately predict what you can borrow. Your lender will use that prediction to determine the parameters of your loan.
Once you know how much you can potentially borrow you must decide who should sign the loan agreement. You are allowed to have a cosigner. However, the cosigner has to reside in the home with you as a primary residence. Also, both of you must be at least 62 years of age and he or she must be directly related to you or be your spouse.
Secondary Qualifications to be Met for Reverse Mortgage Eligibility
In order to qualify for a reverse mortgage you must also meet certain secondary eligibility requirements, beginning with making sure your home is eligible for a reverse mortgage. To obtain a reverse mortgage on a home the home must have a high enough market value. It must also be the place you use as your main residence. Additionally, if there is a mortgage on the home already the amount you can borrow through a reverse mortgage must be high enough to pay the existing mortgage off and still have enough equity remaining to borrow against.
You must also undergo an assessment by the reverse mortgage lender. You will stay in full possession of your home during the duration of the reverse loan. Therefore, you must show evidence that you can afford to pay for the taxes and other expenses associated with home ownership. Additionally, you must pass a general credit check.
The Benefits of Reverse Mortgages as Opposed to Traditional Loans
A reverse mortgage is more beneficial than a traditional loan because you have to pay back a traditional loan right away. You do not have to pay back a reverse mortgage right away. In fact, doing so is discouraged. It is meant to be an extended loan agreement without the need for full repayment until you leave your home. Another benefit is you can choose both how you borrow the money (in a large single payment or increments) and how you spend it. It can be used to fund vacations, pay medical expenses, do home repairs or meet any other financial obligations during your retirement.
Be Wary When Selecting a Reverse Mortgage Lender
One last thing to consider about reverse mortgages is that they are not all the same. You have the option of getting one from a federal source or a private source. Federal reverse mortgages are typically called home equity conversion mortgages. Also, if you choose a private lender you must be wary of potential scams. Always choose a lender with a good reputation, and preferably one you have held other accounts with in the past.