All you need to know about "Reverse-Mortgages"


The A – Z of Reverse Mortgages

Retirement is a phase in one’s life that offers self-reflection. This timeline is the

 point where you think of your accomplishments over the years and their 

respective rewards, especially in the area of finances. “What have you done to 

secure your post-retirement lifestyle financially?” a question that lingers on most 

retirees’ minds. If you have created multiple income streams during your work or 

career years, you have no worries. Otherwise, you may have to come up with 

something practical – a financial safety net to catch you when your income falls. 

reverse mortgage offers just that.

The History of Reverse Mortgages and How They Work

Reverse mortgages are long-term loans that help homeowners meet various financial needs with less exposure to risk, whether it be a dip in your credit score or a foreclosure on your home. This loan option originates from Portland, Maine, in 1961. Nelson Haynes who worked at Deering Savings & Loans decided to help Nellie Young, a widow to his high school coach, by issuing her the first reverse mortgage so she could keep her home. Since then, this mortgage has helped millions of homeowners across the United States and beyond.

Before you access your reverse-mortgage fundyour lender will expect that you pay any outstanding home loan. The reason is this – you can’t have two existing mortgages for an extended period. Since the traditional loans are short-term, you can transition from them to long-term loans (Reverse Mortgages) effortlessly. Then there are closing costs and fees you have to settle as well. You won’t notice them as your lender deducts them before giving you the final amount.

Your Home Equity and Government-Enforced Borrowing Limits

When applying for a reverse mortgage, your lender will calculate the amount you qualify for using a reverse mortgage calculator. This estimation puts into consideration your home’s age, location, and its value on the market. It is worth mentioning that you can only borrow a specified percentage of your total home equity, and not all. This regulation prevents lenders and borrowers from engaging in bogus and infeasible loan deals.

In recent years, the government has enforced this law in which reverse loans come with highlighted borrowing caps. It does not only apply to the government-insured reverse mortgages, and that means the HUD-issued HECMs, but also the private, single-purpose reverse mortgages issued by financial institutions, such as Wells Fargo. Hence, to calculate the value of your home and the available funds, you need a reverse mortgage calculator.

How Can You Receive Your Reverse Mortgage Funds?

Once you qualify for a reverse mortgage, you can set up your payment option. There are three means to get your fund. To begin with, you can receive your money via monthly payments. This option acts as a paycheck and runs all through until your balance is exhausted. Having this payment plan helps you map out your monthly budget. But if that is not for you, then you can set it up as a line of credit. Think of it as a credit card. You can borrow money anytime you want. However, understand that there is a borrowing limit.

Finally, your reverse mortgage funds can come as a lump sum, which is essential if you have several necessities to handle. Taking a reverse mortgage can boost your finances and help you live a fantastic post-retirement lifestyle.