Are you retired or of retirement age (at least 62)? If so, you need to know a traditional home mortgage is not your only mortgage option. If you own your own home, you may qualify for a reverse mortgage, which is a mortgage designed to help retirees. A traditional home loan has several disadvantages that only serve to make your retirement financially harder. You can avoid some of those pitfalls with a reverse mortgage. Here is how it works.  

A Reverse Mortgage is One That Pays You 

You may have heard a reverse mortgage touted as a mortgage that pays you before, but what does that mean? If you apply for a traditional mortgage, you do receive money from your lender, but you usually receive it in the form of one large payment. Then you must pay parts of it back monthly for the duration of the loan. A reverse mortgage is different because you can actually receive monthly payments from your lender, instead. You do not owe any portion of the borrowed money back for an extended period of time. Therefore, you can actually use the funds you receive unimpeded to make your retirement more comfortable.  

The Money You Get from a Reverse Mortgage 

The money you get from a reverse mortgage is largely determined by the total value of your home. However, other factors are involved. That’s why it is important to use a reverse mortgage calculator to get an accurate estimate of what you can borrow. It is an online tool for reverse-mortgage equity calculations commonly used by lenders to establish reverse mortgage terms. One reason it is required is because the government will not allow you to borrow the whole value of your home. Instead, you get a certain amount of the equity determined by a special formula, which is subject to change. 

Ways a Reverse Mortgage Can Help You 

A reverse mortgage can help you in many ways. After the reverse mortgage calculator determines how much equity is available to you, you can use some of those funds to pay off your existing mortgage, if you have one. In fact, that is a requirement, since you cannot legally have both loans at once. Therefore, it can help if you are having difficulty dealing with ongoing standard loan payments. 

Even if you do not already have a traditional home loan to pay off, a reverse mortgage can assist you. For example, it can provide you with ongoing funds to help you loosen up your budget. That way you can go from watching everything you spend to being able to splurge on items you want without worrying. Reverse mortgage funds can also help you cover home repairs or other abnormally large expenses beyond your monthly bills. 

Staying Secure in Your Home with a Reverse Mortgage 

One of the top reasons to consider applying for a reverse mortgage is to maintain your sense of security regarding keeping your home. If you apply for a traditional mortgage and miss payments, you can face foreclosure. A reverse mortgage is different because you have to agree to stay in the home and continue being the owner in order to qualify. Your lender also cannot evict you for not making payments on time because payments are not owed at specific times. 

Defining the Loan Period of a Reverse Mortgage 

A traditional home loan has a loan period. For example, you might have five years to pay back the loan with interest. A reverse mortgage has an undefined loan period contingent on you remaining in the building as a full-time resident and owner. Whenever you stop living in the residence, you must pay the remaining amount due. That means your loan period could be a decade or more, depending on the circumstances. That is beneficial because you can enjoy your retirement free of the burden of repayment, but keep in mind it means the interest you must pay is likely to be much higher than interest on a short-term loan. 

Are you retired or of retirement age (at least 62)? If so, you need to know a traditional home mortgage is not your only mortgage option. If you own your own home, you may qualify for a reverse mortgage, which is a mortgage designed to help retirees. A traditional home loan has several disadvantages that only serve to make your retirement financially harder. You can avoid some of those pitfalls with a reverse mortgage. Here is how it works.  

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