Living Life Our Way

Living Easier with a Reverse Mortgage

Retirement should be a time of easy living. However, it is not so easy when your funds are limited. Whether you have trouble meeting monthly financial obligations or just encounter a sudden expense, extra cash may be required. One way to obtain that extra cash is by applying for a home mortgage. Of the mortgages available, a reverse mortgage might be the best.

Living Easier with a Reverse Mortgage

Reverse Versus Standard Home Mortgage Borrowing

As you may already know, a standard home mortgage lets you borrow against the worth of your home, also called equity. However, you need to start paying that borrowed money back soon after you get the loan. You pay it back in portions of a specific minimum amount over a set length of time. For example, you might get a five-year mortgage.

The borrowing terms of a reverse mortgage are different from those of a standard mortgage in two major ways. The first is you do not have to make small repayments on a specific schedule. The second is the loan does not last for a set number of years. You might ask yourself what is a reverse loan repayment period then, and how it is it established? The answer is it is a period that lasts for as long as you make it last or until you cease home residency. If you keep living in the home, the loan could theoretically last a decade or more. You pay back the amounts that you can when you can do so.

Reverse Mortgage Funds and How They Are Received

When you apply for a reverse mortgage, a standard option is to ask for money each month. When you receive a set monthly amount, it is almost like receiving pay as you did when you were working. Those payments only last for as long as there are funds to borrow. However, for as long as they last, they offer you the financial assistance you may need to cover your monthly living costs.

If you do not want monthly payments, you have other choices. You can ask for a line of credit, for instance. That allows you to take out cash in amounts you choose at times you choose. Thus, you only borrow exactly what you need. Another alternative is to request all available funds be paid to you at one time. That option is often best when you have a large one-time expense to cover.

The Pros of a Reverse Mortgage

The obvious pros of a reverse mortgage are you can borrow money how you want and spend it how you want. You also do not have to pay it back by exact dates. Therefore, you can live your retirement life the way you want with no money concerns in the immediate future. Another pro is the ability to continuously own your home with no eviction fears relating to missed payments, since there are not any mortgage bills to miss.

The Cons of a Reverse Mortgage

The most obvious con of a reverse mortgage is you have to keep living in the home, if you do not want the loan to be called in. Therefore, you cannot easily move if you want to. Another con is the home can be sold when you finally do leave it, if you are unable to pay the balance. That may disrupt any plans you have to leave it to a family member.

Having Reverse Mortgages and Standard Mortgages Together

Another potential issue of applying for a reverse mortgage is you can’t have it and a standard mortgage at the same time. If you already have signed a standard mortgage agreement, your reverse mortgage is first used to pay that loan balance. Only the funds remaining after that are available for you to use for other expenses.

Is a Reverse Mortgage Best for You?

Whether to apply for a reverse mortgage or not is a personal choice. Determining if it is best for you requires good knowledge of your current financial situation. It also requires in-depth knowledge of how a reverse mortgage works. Therefore, to make your final choice, you might need to consider talking to a reverse mortgage counselor. If not, at least consider the pros and cons carefully before deciding.

*This is a collaborative post

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