Reverse mortgages and retirement – the options
Retirement has many upsides, and I don’t need to list them out here. But suffice to say, when you get to retirement age, you’ve earned your rest, and some time in the sun.
Now for the bad news – retirement generally means getting paid much less. And while many people hope to have paid off their mortgage by that time, the best laid plans don’t always come to fruition. This is why reverse mortgages are worth looking into.
What is a reverse mortgage?
Reverse mortgages become an option for anyone above 62 years old. If you are considering either remortgaging or financing in other ways such as home equity loans, the end result could be that you end up taking on more debt than you would have liked. With reverse mortgages, the options are slightly different.
Pay off your mortgage – with the reverse mortgage
The purpose of the reverse mortgage is to pay off the existing mortgage on your home – and anything left over is yours for your retirement. This achieves the dual benefit of paying off your home, and being able to tuck away some savings for your retirement.
Do you qualify?
The conditions are pretty straightforward. To qualify for a reverse mortgage, you need to be 62 or above, the owner of the property to be mortgaged, and it’s your main residence. You must also have a decent credit score, and be financially stable.
Using our reverse mortgage calculator, you can check your eligibility very easily before you even apply to the bank. Banks utilise reverse loan calculators to gauge whether a home’s market value makes a new loan on it viable. From there, the law permits you to borrow a certain percentage of your home’s current market value. Based on this, the lender will calculate your offer and present a reverse mortgage offer to you.
Don’t miss a trick
Banks and other lenders will also be looking at whether you can keep up the repayments on the new mortgage, and handle any maintenance or issues with the property. It’s important to note that non-payment of a reverse mortgage cannot result in repossession of your home. It can however result in the mortgage being cancelled, which is an equally undesirable situation.
That’s a relief
Traditional mortgages are familiar, and we all know how they work. But that doesn’t mean they are always the best fit for every situation.
The benefits of reverse mortgages are that there is some respite and the opportunity to set a little savings aside for your retirement, and also means you won’t lose your home in the event that you miss some monthly payments. Instead, there isn’t a deadline for repayment, and the only time you would need to pay the full amount of the mortgage is if you were to sell you home – and then you would pay it using the proceeds. This is why reverse mortgages are definitely an option worth considering when you near retirement age.