The word “retirement” may bring to mind images of traveling or relaxing in an easy chair. However, nothing about retirement is easy when you do not have enough money saved to compensate for the loss of your working income. If you find yourself in that position, being a homeowner can work in your favor. That is because you can convert some of your home value into ready cash. Then you can use that cash to pay for medical bills or any other retirement expenses you want. But can getting a reverse mortgage truly solve your financial woes? To answer that, you have to understand the inner workings of the reverse mortgage process.
Borrowing with a Reverse Mortgage Instead of a Regular Home Loan
You could obtain a regular loan on your home instead of a reverse mortgage. However, a typical standard loan agreement limits the time you have to pay back what you borrow. It also requires you to pay back portions of what you borrowed on a predetermined schedule. Missing payments can result in losing your home.
A reverse mortgage allows you to borrow money free of such concerns. No strict repayment schedule is established. There is also know exact date set for full repayment. Instead, you pay back what you borrow on your own schedule, as long as the home remains in your possession. That means your financial woes are alleviated, unless you move off the property.
Finding Out About the Reverse Mortgage Funds You Can Receive
The easiest way to learn what funds are available to you through a reverse loan is to use a reverse mortgage calculator. It is a special tool used by reverse mortgage lenders to calculate the amount they can lend. That amount is not up to the lender exclusively. The reverse mortgage calculator is necessary because the government regulates the procedures for lending and does not allow loans to exceed certain maximums.
How to Choose Your Reverse Mortgage Lender
You should always choose a reverse mortgage lender you can trust. That step is important before you even worry about a reverse mortgage calculator assessment. One option is to consider chain banks such as Wells-Fargowith long reputations for excellence. When you get a loan through such a bank, you may have more piece of mind. Other options include getting government reverse mortgages though HUD or other agencies or applying for a reverse mortgage through your local credit union or bank.
None of those are bad choices, but they all have some minor differences. For example, government-issued loans are also government-insured. When choosing a reverse mortgage lender, the biggest requirement is to avoid institutions you know nothing about. There are several reverse mortgage scams in existence. By selecting a trusted source, you can avoid those scams.
Setting the Parameters of Your Reverse Mortgage
One reason reverse mortgages are so popular is you have a lot of control over how your reverse loan is set up. You can discuss the parameters with your lender and come up with a borrowing system that works for you. If your biggest concern in retirement is the loss of your scheduled paychecks, monthly payments may be the solution for you. Then you can rely on regular income to help you pay common expenses. Alternatively, you may only need a reverse mortgage to cover a major expense, like medical bills. If that is the case, you can establish a line of credit and borrow the exact amount you need or request a large single payment to pay for the major expense.