Homeowners up and down the country, whether it be their very first time buying a property, or those seasoned professionals who seem to flip houses for a living, are currently facing big decisions when it comes to finding ways to reduce their monthly and annual outgoings.
When looking for ways to access your money, there are several different avenues of which to consider and one of these is to apply for a reverse mortgage. If this sounds like you, then continue reading to discover the most important things to know when considering a reverse mortgage.
What Is a Reverse Mortgage?
A reverse mortgage is specifically targeted towards those homeowners who are over the age of sixty-two.
Usually, such individuals have already paid off the normal mortgage on their home and are looking to take some money out of the value of their home. A reverse mortgage allows them to borrow a part of their home’s equity from the lender, unlike a normal mortgage, which is the other way around.
What Are the Eligibility Requirements?
There is no way you will be able to apply for a reverse mortgage if the principal homeowner is under the age of sixty-two, but providing they are, the other main eligibility requirements for this type of mortgage are slightly more flexible.
As a general rule, the house should be where you reside for more than nine months of the year, you cannot owe federal debt without a payment plan you are adhering to and you must own your house entirely or at the very least have paid off the majority of your mortgage.
How Much Can You Borrow?
As you would expect, the amount of money someone who has been offered a reverse mortgage can borrow out of their home is dependent on the individual, but as a general rule, this figure will depend on the value of the property, the age of the borrower and the current interest rates.
If you decide to go ahead with this and choose one with a variable-rated HECM, then you will be offered several payment choices, which usually include the following:
- A continuous credit line, which you can withdraw until gone
- Monthly equal payments (as long as the house is your primary residence)
- Fixed monthly payments combined with a credit line
- Equal payments at a regular date decided by you
What Are the Main Benefits of a Reverse Mortgage?
The final and most important thing you need to know when considering applying for a reverse mortgage are the main benefits and to ascertain if said advantages will work for you.
Successful applicants for a reverse mortgage will benefit from extra money to enjoy adventures and make new memories in their retirement years, the money can be spent on anything from healthcare and living expenses, to paying off other debts or monthly bills and they have no need to pay monthly payments towards their overall loan balance.
