Mortgage Guide: Advantages of Reverse Mortgages and when to Apply for One

A reverse mortgage is a type of mortgage that allows you to borrow back your home equity. The same way you once paid your lender, your lender is now paying you… wow, what a turn of events isn’t it? Your home equity is basically your home value minus the mortgage debt that you currently have. If you are above the age of 62, there is no need to struggle with your medical care costs or suffer because of declining retirement account balances, there are new and better ways of getting cash to maintain your living standards. Basically, the amount of money that you are entitled to depends on your ages, the interest rates, and the current value of your home.

The good news is that you will continue living and owning the property for the term of the loan. You will not have to make any payments towards the loan until you decide to sell the home, move out for a year or more, or die. You can get a home equity as a monthly payment, as a credit line, as a lump sum, or as a combination of all the aforementioned. Having a monthly payment is a surety of some form of income for as long as you shall reside in your residence. On the other hand, you could use the lump sum as you want, say to buy an annuity that could give you a lifelong income. As for the line of credit, you will not need to pay any interest on the cash that you have not yet withdrawn from the bank while your money will be earning interest as it waits to be used.

You can consider taking a reverse mortgage only if:

• You don’t plan to have your heirs inherit the home
• You seek funding for a huge expense such as major home repair or medical bills
• You seek the peace of mind that comes from the assurance that your financial needs are well taken care of
• You want to enhance your lifestyle as you enjoy your retirement years
•  You need extra income to survive on and the only available asset that you have is your home
• You plan on staying within the premises all your life
• You own the property clear and free, or you have a tiny first mortgage.

Advantages of reverse mortgages

• The cash you get is tax free and isn’t normally considered as an income
• You are making no payments whatsoever until you sell the house or the loan matures
• It can help you be financially independent thus improving the quality of your life
• You are able to stay within the premises and retain the title