Answering Your Questions About Obtaining a Reverse Mortgage
If you are retired or retiring, you may be wondering if you can benefit from a reverse mortgage. You have probably heard it is a retirement loan designed to provide more money for you to spend when you are no longer working. Yet, you may have many questions about how the reverse mortgage process works. Here are some common reverse mortgage questions and answers to help you better understand the process of obtaining one.
How is a Reverse Mortgage Different from a Regular Home Mortgage?
A reverse mortgage is different from a regular home loan because you will not have to pay any of it back for a long time. You also will not receive scheduled mortgage bills. Instead you are encouraged to take years to pay the loan back. As long as you stay in the home and pay essential taxes and other home-related bills, the reverse mortgage lender will not call in your loan. Therefore, you can spend years enjoying retirement without adding to your scheduled monthly bills.
In fact, in most cases a reverse mortgage lender provides monthly payments from the home equity. Although, you can ask for one large payment or a line of credit you can borrow against as needed, if you wish. When you are receiving monthly installment payments, your income is supplemented to help you pay utility bills and other monthly expenses. A large lump sum may be more appropriate if you have a large expense, such as a medical bill.
Can You Borrow All of Your Home’s Value as Cash?
You may be wondering if the full value of your home, also known as its equity, is accessible to you when you apply for a reverse loan. The answer is no, which is why a reverse-loan calculator is required.It is a special tool designed to look at multiple variables necessary to figure out how much home equity you can request as cash from the lender. Then you can borrow the amount established
Can You Have a Regular Mortgage and a Reverse Mortgage?
If you already have a regular mortgage, you may be wondering if you qualify for a reverse loan. The answer is you might, but there will be one catch. After the total amount you can borrow is calculated, the amount you still owe on the standard loan must be deducted and immediately used to pay it in full. You cannot maintain both mortgages for an extended period of time.
Do you Still Own Your Home When You Have a Reverse Mortgage?
Taking out a reverse mortgage on your home does not mean you have to relinquish ownership. In fact, a condition of the loan terms is you must continue to both own and live in the home. That is why you cannot take out a reverse mortgage on a vacation property. You also cannot take out such a loan on a rental property unless you live in one of the rental units yourself. Since you retain ownership of the home, you are also financially responsible for it. Therefore, you must pay taxes and other fees necessary, as well as take care of any home maintenance issues that arise.
What Happens When the Reverse Mortgage Balance is Due?
When the reverse mortgage balance is due, the lender will give you a short time to pay it. If you pay the balance, you retain ownership of the home. Since the balance is not due until you stop using the home as your primary residence, retaining ownership affords you the opportunity to give the home to a loved one or use it for other purposes, as you wish. If you leave the home and do not pay the balance, the lender has the right to collect the owed funds through the sale of the property.